RESP accounts enable you to make contributions now towards the cost of future education. Unlike RRSPs, contributions to this type of plan are not tax deductible. Investments within an RESP have the potential to grow and income is tax-sheltered until paid out to the beneficiary. RESPs may be very attractive for those beneficiaries who qualify for the Canada Education Savings Grant. Any individual can set up an RESP including grandparents, aunts, uncles, godparents and friends.
Unlike an RRSP, your contributions are not tax deductible but the funds grow tax sheltered until paid out to the beneficiary.
Contributions:
- Lifetime contribution limit of $50,000 per beneficiary
- No tax deduction for contributor
Canada Education Savings Grant (CESG):
- The government will contribute up to 20% of the first $2,500 of annual RESP contributions, to a maximum of $500 per year, per beneficiary aged 17 and under.
- Lifetime maximum CESG contribution will be $7,200 per beneficiary
- Contributions for beneficiaries aged 16 and 17 will only receive a CESG subject to certain stipulations
- CESG room may be carried forward until the beneficiary turns 18
- The beneficiary must have a social insurance number (SIN) to receive the CESG
