Top 10 RESP Rules You Need To Know
- You can contribute up to $50,000
There's no limit to how much you can invest annually, but it's best to time your contributions to take advantage of the Canada Education Savings Grant (CESG).
- There is no maximum annual contribution
You can contribute as much as you want each year up to the lifetime cap of $50,000. This is particularly useful for families that find they have more to invest some years than others.
- Beneficiaries can receive a maximum of $500 in CESGs per year, up to $7,200 total
You have 15 years of the Basic and Additional CESGs available to you. Start early and plan your investment to receive the maximum amount each year.
- Contribution room carries over
Contributions over the grant maximum can be carried over to the next year for a total of $1,000 in CESG contributions up to the lifetime limit of $7,200.
- Contributions aren't tax-deductible
RESP subscribers may not deduct contributions from their taxable income. Contributions aren’t taxed as income when they are withdrawn.
- Students may access up to $2,500 of their savings per academic quarter
Students can begin receiving RESP funds as soon as they enroll in college. If your child decides not to go on to college, contributions may be returned to subscribers or the RESP can be transferred to another child.
- Interest and grants are paid out as Educational Assistance Payments (EAPs)
Withdrawn contributions aren’t taxed, but income from the CESG and earned interest is considered an EAP and is taxed according to the student’s income level. (Many students pay little or no tax on withdrawals.)
- Anyone can contribute to an RESP
You may set up group plans for friends and family to contribute or a Family Plan to save for more than one child. Your RESP provider will help you choose the education savings plan that’s best for you.
- Canada Learning Bond
Lower income families may be eligible to receive additional CESG and may also be eligible for the Canada Learning Bond.
- Help Is Available
Everyone's situation is different and the rules for Canada's Registered Education Savings Plans can often be confusing. If we were unable to answer your question fortunately there is help available. Contact a licensed Heritage RESP representative they are government licensed, keep on top of the latest changes to the program and can provide answers relevant to your unique situation.
RESP Contribution Rules
Subject to the lifetime maximum below, the Government of Canada matches 20% of your contributions to a Registered Educations Savings Plan by paying the Canada Education Savings Grant (CESG)* directly into your RESP annual account, irrespective of your household income. In the 2007 federal budget, the limit was increased to $500. Unused grants accumulate and are available to match future contributions. The maximum CESG per year is $500.* RESP rules stipulate the lifetime maximum CESG grant that a child can receive is $7,200.*
When a beneficiary of a plan starts full or part-time studies in a qualifying education program they can begin to withdraw funds from the plan.
RESP contributions made to the RESP are by rule not taxed on withdrawal. However, grants paid by the Government into the plan and the accumulated interest garnered by the plan is taxed at the tax rate of the beneficiary. As a student who may be working part time or not at all they are usually in a low tax bracket.
There are also RESP rules that apply if a child does not pursue a post secondary education. Contact us for more information.
RESP Rules for Canada's Registered Education Savings Plans can often be confusing and it’s hard to know if the information online is outdated. We created this page to answer many of the questions you may have about saving for higher education with an RESP. We'll keep this article updated if and when the rules change, so please bookmark or link to us to stay informed of revised RESP rules.