What is an RESP?
A Registered Education Savings Plan (RESP) is meant for saving towards your child/children’s future education. You can start this plan for your children, nephews, nieces, grandchildren, or family friends as long as the beneficiary is a Canadian resident and has a Social Insurance Number (SIN).
- The amount you invest is not tax deductible.
- Canada Education Savings Grant (CESG) plan matches 20 percent of your savings per student till age 18, up to $2,500 each year to a maximum amount of $7,200 over the life of the plan.
In addition to the CESG provided by the federal government, Quebec residents have been given an incentive called the Quebec Education Savings Incentive (QESI) to start saving early for post-secondary education.
- This is a refundable tax-free measure for families having a registered RESP opened with a provider that offers QESI.
- To avail of this credit, the trustee appointed by the RESP provider should apply for it with Revenue Quebec.
- The tax credit is paid directly into the registered RESP opened with the QESI provider.
How much can you contribute towards RESP?
There is no limit to the number of investments under an individual’s name. Also, there is no annual limit on how much you can put away. However, the basic 20% Canada Education Savings Grant (CESG) and 10% Quebec Education Savings Incentive (QESI) are only applicable on the first $2,500 of annual personal contributions to an RESP. Any amount over $2,500 is not eligible for these grants.
In some instances, you may find yourself in the position of being able to claim grants from previous years that you did not get. In this instance, an extra $2,500 (so a total of $5,000 in a given year) may be eligible for grant, but you will want to make sure before contributing in excess of $2,500 in a given year. However, there is a lifetime contribution limit of $50,000 per beneficiary. Your RESP can remain open for up to 35 years.