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REGISTERED EDUCATION SAVINGS PLANS
WHAT DO I NEED TO KNOW ABOUT REGISTERED EDUCATION SAVINGS
PLANS?
1. CONTRIBUTIONS:
i. Subscriber can contribute up to $4000 a year (per beneficiary)
for 21 years to a maximum of $42000
ii. RESP contributions are not tax deductible
iii. No contributions can be made after the 21st year
2.CESG (Canada Education Savings Grant)
i. 20% on 1st $2000 of annual RESP contributions made after
1997 up to a maximum of $400 per year for beneficiaries 17 and
under
ii. Maximum CESG for each beneficiary is $7200
iii. Beneficiary must have a valid Social Insurance Number
to receive the CESG
iv. The right to the CESG generally applies to any child aged
17 or under.
v. However, children aged 16 and 17 are entitled to receive
the Grant only if specific criteria are met
3. CARRY FORWARD:
i. You cannot carry forward unused contribution room
ii. You can carry forward unused CESG room from 1998 and on
until the beneficiary turns 17
4. RESP WITHDRAWALS:
i. To withdraw income from the RESP the beneficiary must be
enrolled full-time in a qualifying education program
ii. Money received can be used to pay for anything that will
assist the beneficiary during their studies (i.e. tuition, textbooks,
computer)
iii. Beneficiaries enrolled full time in qualifying education
programs receive income from RESPs in the form of Educational
Assistance Payments which include a CESG portion and are taxed
in beneficiary's hands (with the exception of the invested capital,
if any, which is not taxable)
iv. Contributions can be withdrawn any time tax free
a. CESGs may have to be repaid and restrictions may apply to
future CESG payments
b. EAPs which include a CESG portion, are taxed in the beneficiary's
hands
5. BENEFICIARIES:
i. If there is still money remaining in the RESP after the
beneficiary has completed their education another beneficiary
may be named.
6. TAXATION:
i. Contributions are not tax deductible
ii. Beneficiaries who receive income from the RESP report it
as Educational Assistance Payments on their tax returns
7. MATURITY:
i. RESPS mature in 25 years - if money still remains after
this time the subscriber can request that the contributions
be returned to them, the beneficiary or transferred to another
account.
ii. Individual Plan: if the beneficiary does not attend a post-secondary
institution and a qualifying replacement beneficiary has not
been named, the CESG must be repaid to the government.
iii. Family Plan: CESG can be used by other beneficiaries to
a maximum of $7200 per beneficiary (the remainder must be repaid).
iv. If none of the beneficiaries pursue post secondary education
all CESG money is repaid but you can transfer the RESP asset
growth to your RRSP or spouse's RRSP if there is contribution
room available up to a specified lifetime limit.
This material is for information purposes only and should
not be construed as legal or tax advice. Every effort has been
made to ensure its accuracy, but errors and omissions are possible.
Individual circumstances may vary and specific legal and tax advice
is recommended. Future tax changes and market conditions may affect
this information.
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