Registered Education Savings plans
What is RESP
RESP (Registered Education Savings plans) is a government registered plan that can help your children save for college or university education in the future.
Features of RESP
1. It allows contributors to invest in the account tax-free growth until the beneficiary is registered in a college, a university, or an eligible post-secondary educational institution.
2. When the beneficiary starts to use this fund for education, all the income of the contributors in the fund account including government allowances (Grant) will be reset to the normal tax payment status (the contributor dose not need to pay taxes for their investment principal). However, since students are those with no income or low income, they do not have to pay taxes on RESP account income.
3. Every child of a Canadian tax resident can be a beneficiary.
4. Parents, grandparents, relatives or friends all can contribute, and up to $50000 can be invested in RESP to a specific beneficiary for each person.
5. Each beneficiary can receive a government grant of up to $7,200 (Grant). If the children who born on December 31, 2003 belongs to a low-income family, they can receive an additional subsidy of $525 when open an RESP account, and $100 per year until they reach 15 years old (Canadian Leaning Bond).
6. The contributor’s investment growth in the education fund account is tax-free. Until the beneficiary registers for school and withdraws the funds from the account, the beneficiary will need to declare the income for the year according to the amount of funds withdrawn. (The principal invested by contributors of the education fund is not counted as income).
7. If the specific beneficiary is not able to enter the higher education system, the new beneficiary must be under 21 years old, and the new beneficiary must be the sibling of the former beneficiary or the new beneficiary and former beneficiary must be under 21 years old and contributors Relatives.