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Registered Education Savings Plan (RESP)

DFSIN - RESP - Financing post-secondary education

A Registered Education Savings Plan (RESP) allows you to finance the postsecondary education of someone close to you, for example a child, grandchild, niece or nephew.

The federal government offers the Canada Education Savings Grant an amount corresponding to 20% of contributions paid in a RESP for children under the age of 18, with a maximum of $500 a year. This grant can reach $1,000 if it was not used the previous year. The maximum for each beneficiary is $7,200. Also, for beneficiaries residing in Quebec at the end of the year, contributions made on their behalf are eligible for a 10% tax credit (Quebec Education Savings Incentive), up to a maximum of $250 a year ($500 if the credit was not used the previous year), for a maximum of $3,600 per beneficiary.


There is no RESP annual contribution limit. However, for each beneficiary, the lifetime contribution limit to a RESP is $50,000.

Contributions can be made up to the 31st year after the plan has been opened; the maximum duration of a RESP is 35 years. In the case of a RESP where the beneficiary is eligible for a Disability Tax Credit, these limits are adjusted to the 35th year after the RESP was opened and a maximum duration of 40 years. Finally, in the case of family plans, contributions cannot be made for beneficiaries aged 31 years or older.

RESP contributions are not tax deductible but can grow tax-free until the child begins postsecondary studies and makes withdrawals from the plan.

Advantages

  • Thanks to the Canada Education Savings Grant, the Quebec Education Savings Incentive and the non-taxation of income generated by the plan during the accumulation phase, subscribers can achieve their savings objectives much faster.

  • Beneficiaries are responsible for paying tax on income generated by the plan once they begin to make withdrawals. Since children are generally taxed at a lower rate than their parents, the RESP provides children with more attractive capital and offers parents the opportunity to split their income.

  • RESPs can have more than one beneficiary, which makes it easier to transfer accumulated sums from one child to another if one of them does not pursue a postsecondary education.