RESP
Registered Education Savings Plans (RESP)
RESPs are an excellent way to save for post-secondary education. For most flexibility, both spouses should set up a family plan.
You can contribute a maximum of $42,000 into an RESP. Contributions to a RESP are not tax deductible but the investment income is tax sheltered. When the student uses the RESP for post-secondary education, the accumulated income and any grants received become taxable to the student. As the student typically does not have a very high income, there is usually little or no tax on this income.
In 1998 the government introduced the Canadian Education Saving Grant. The RESP receives 20% of the first $2,000 in contributions, up to $400 each year per beneficiary. You can double-up your contribution in any year for a missed year. The maximum total grant is $7,200 per student. The plan must be set up before the end of the year that the child turns 15.
Depending on your family income, you could receive additional grant on contributions made after 2004:
- If your net family income is below $35K, the grant will be 40 cents for every dollar on the first $500 you save in your child’s RESP each year.
- If your net family income is between $35K and $71K, the grant will be 30 cents for every dollar on the first $500 you save in your child’s RESP each year.