The spiralling cost of post-secondary education has many parents concerned about whether they will be able to afford to send their children to college or university. RESP provide a comprehensive education savings solution by combining tax-free growth of investments with government grants.
Contributions to an RESP may qualify for federal and provincial government grants. Any contributions and grants that accumulate grow tax free in an RESP. When funds are withdrawn for education, only the growth and grant portion of the plan is taxable in the hands of the student, who will likely be in a low tax bracket.
In 2004, the Government of Canada introduced two additional RESP grant programs. In addition to the Basic Canada Education Savings Grant (Basic CESG), RESP beneficiaries can also qualify to receive the Additional Canada Education Savings Grant (Additional CESG) and the Canada Learning Bond (CLB).
Annual maximum amount per beneficiary
|RESP contribution limits||1998 to 2006||$4,000|
|2007 or later||No annual limit|
|Basic CESG||Parent||Annual amount added to grant room||$400|
|Basic CESG annual limit||$800|
|2007 or later||Annual amount added to grant room||$500|
|Basic CESG annual limit||$1,000|
Source: Human Resources and Skills Development Canada
Beneficiaries may be eligible to receive a larger grant under other RESP programs.
Based on a family’s net income, RESP beneficiaries may receive an Additional CESG for contributions as follows:
- Families with an income below $38,832* will receive an additional 20% grant, above the Basic CESG, on the first $500 contributed annually to an RESP.
- Families with an income between $38,832* and $77,664* will receive an additional 10% grant, above the Basic CESG, on the first $500 contributed annually to an RESP.
- All other RESP contributions up to $5,000, including those by families with net incomes over $77,664*, receive the 20% Basic CESG.
*2009 income levels
Note: The Additional CESG cannot be carried forward to future years.
Canada Learning Bond
RESP beneficiaries qualify for the $500 Canada Learning Bond (CLB) if:
- They were born on or after January 1, 2004.
- They are dependants of a primary caregiver who receives the National Child Benefit Supplement (NCBS) as part of the Canada Child Tax Benefit (known as family allowance or baby bonus).
Under the Canada Learning Bond, an additional $100 per year is available until the child’s 15th birthday, as long as the NCBS is received. Over time, the CLB could add up to an additional $2,000 in grant money.