An RESP is a plan that allows you to save money to finance post-secondary education.
What are the advantages of an RESP?
- Your deposits grow tax-free.
- To encourage saving for post-secondary education, the governments of Canada and Québec are providing grants that are added to your savings. This sometimes depends on your income.
How much can I contribute?
Your total contributions can’t exceed $50,000. For example, you can contribute $5,000 per year over 10 years, or even $50,000 in a single year.
Each contribution makes you eligible for a grant. However, the amount of the grant is limited by a maximum.
- If you contribute a large amount in a single year, your grant could be limited by this maximum. You could therefore lose grants to which you may have been entitled had you spread your contributions over several years.
What government grants are available?
– Québec Education Savings Incentive (QESI)
To encourage saving for education, the Government of Québec pays a reimbursable tax credit directly into your RESP.
The credit is equivalent to 10% of the contributions paid over the course of a year, up to a maximum of $250. For example, Mr. Tremblay opens an RESP for his son Jean and puts in $2,000. Revenu Québec pays $200 into the RESP, which represents 10% of the contributions Mr. Tremblay made in 2014.
Low-income families may see their credit increase by $50 per year. Your RESP provider must apply to Revenu Québec for it.
– The Canada Education Savings Grant (CESG)
No matter what your family income is, 20% of the first $2,500 contributed annually will be added to the RESP (maximum $500 per child).
For example, if you contribute $3,000 to your child’s RESP in a year, the amount added to the RESP will be $500 (20% of $3,000 = $600, but the maximum of $500 applies).
Low- and middle-income families receive an additional CESG.
Can contributions be deferred to another year?
Since 2008, if your contributions don’t allow you to receive the maximum CESG or QESI grant in a given year, you won’t automatically lose the grant. You can contribute more in the following years to compensate and obtain the full grant or a portion of it.
However, despite any accumulated rights, the maximum annual basic grant you can receive is $1,000 for the CESG and $500 for the QESI. Depending on the amount you contribute, you may not receive all the grants for which you would have been eligible had you contributed every year.
You’ll need a savings and investment strategy to achieve your objective. Know about your full advantages by completing the form.