What is a Registered Education Savings Plan (RESP)?
An RESP is an education savings plan registered under Canada’s Income Tax Act, which is established for the purpose of providing financial assistance to a Beneficiary (usually a child) when he or she pursues a post-secondary education. Income on savings within an RESP grows tax-free until the child is ready for post-secondary education. The earnings are taxed in the hands of the student/Beneficiary, who typically pays little to no tax. In addition, RESPs may qualify for various government incentives that help parents, relatives and friends save for a child’s post-secondary education. Subscribers and Beneficiaries enrolled in an RESP must have a valid Social Insurance Number. A Beneficiary must be a Canadian resident when the RESP is opened and every time a contribution to an RESP is made. There are number of grants available under RESP program.
Canada Education Savings Grant (CESG)
Through the Canada Education Savings Grant (CESG), the Government of Canada could contribute up to $7,200 to your child’s education savings plan. On top of your principal contributions, CESG could add 20% on the first $2,500 contributed annually, to a maximum of $500 per child per year. Contribution room not used in a given year can be carried forward.
Who qualifies for CESG?
- Children who are Canadian residents;
- Children 17 years of age or younger; and
- Children who have an RESP
Additional Canada Education Savings Grant (A-CESG).
For families with modest incomes, the Government of Canada provides Additional Canada Education Savings Grants (A-CESG). On top of the basic 20% for the first $500 annual contribution, the A-CESG will add 10% or 20%, depending on your family’s net income.
Canada Learning Bond (CLB)
Families that qualify for the National Child Benefit Supplement (NCBS) are eligible for the Canada Learning Bond. The Government of Canada will give qualified children an initial $500 grant, followed by $100 grants every year until your child turns 15, providing up to $2,000 for post-secondary education.
Alberta Centennial Education Savings Plan (ACES)
To encourage families to start saving for their child’s education as early as possible, the Province of Alberta will contribute $500 to the RESP of newborn children who have a parent living in Alberta either at the time of birth or the time of application. In addition, there are ACES grants of $100 available when children living in Alberta turn 8, 11 and 14, as long as they are attending school in that province.
Quebec Education Savings Incentive (QESI)
Up to $3,600 is available to Quebec residents through the Quebec Education Savings Incentive (QESI).
The QESI will provide a grant of 10% of your annual RESP contributions – up to $250 per year, with a lifetime maximum of $3,600 per child. To qualify for QESI grants, your child must:
- Be a Quebec resident on December 31 of the taxation year
- Have a Social Insurance Number
- Be the designated beneficiary of an existing RESP
- Be under 18 years old
Additional Quebec Education Savings Incentive (A-QESI)
Additional funds could be available to families with an annual combined income of less than $78,120. Each qualified child can carry forward $250 of unused QESI entitlement for up to three years, but only up to a maximum of $500 in a calendar year.
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