RESPs at a glance…
Author:
News Canada
(NC)—There
is still some confusion about the Canadian Registered Education Savings Plan
(RESP) program and how it works. Here is a big-picture overview:
•
Parents, grandparents, godparents, uncles and aunts or anyone else can create
and contribute to a child's RESP.
•
The federal government's Canada Education Savings Grant (CESG) program adds
20% to your RESP contributions to a maximum of $400 per year, per child,
until the child reaches age 17.
•
The maximum lifetime CESG payment is $7,200 per child
.•
Contributions from all sources for a child's RESP are subject to a maximum
of $4,000 per year, per child, to a lifetime maximum of $42,000 per child.
•
Contributions aren't tax-deductible, but investment income and gains generated
within the RESP are allowed to grow on a tax-deferred basis.
•
When RESP funds are used for post-secondary education costs, the income portion
earned will beincluded in your child's taxable income. As students, your
children will probably not have much other income and will be eligible for
the tuition and education tax credits so they may pay little or no tax.
•
Contributions can be made for as long as 21 years. The plan can exist for
as long as 25 years.
•
If you're saving for the education of more than one person, you may want
to consider a multi-beneficiary or family plan. Family plans allow for flexible
allocation of benefits among beneficiaries (e.g., in case one does not pursue
post-secondary education, or if costs vary widely among children).
•
If your child doesn't pursue post-secondary studies, the income and growth
can be rolled over tax-free into your RRSP or a spousal RRSP, provided that
contribution room is available. The CESG portion of the funds must be returned
to the government.
This
article is intended to provide general information and should not be construed
as specific advice. This article is not applicable in Quebec.
-
News Canada
