RESP Calculator

What is an RESP?

A Registered Education Savings Plan (RESP) is a tax-sheltered savings account designed to help Canadian families save for a child's post-secondary education. While contributions are not tax-deductible (unlike an RRSP), the investment growth inside an RESP is tax-deferred. When funds are withdrawn for education, the growth portion is taxed in the student's hands -- typically at a very low rate since students usually have little income.

Canada Education Savings Grant (CESG)

The biggest advantage of an RESP is the Canada Education Savings Grant (CESG). The federal government matches 20% of the first $2,500 you contribute each year, up to a maximum of $500 per year in basic CESG. The lifetime CESG limit is $7,200 per beneficiary. CESG is available until the end of the calendar year the child turns 17.

Additional CESG for Lower-Income Families

Families with lower net incomes may qualify for an Additional CESG on the first $500 contributed each year:

• Family net income under $53,359: Extra 20% on the first $500 (additional $100/year)
• Family net income $53,359 - $106,717: Extra 10% on the first $500 (additional $50/year)
• Family net income over $106,717: No Additional CESG

These income thresholds are indexed annually to inflation.

Canada Learning Bond (CLB)

The Canada Learning Bond is a government contribution for children from low-income families. Eligible families receive an initial $500 plus $100 per year (up to age 15), for a maximum of $2,000. The CLB does not require any personal contributions -- you just need to open an RESP. Eligibility is based on the family's receipt of the Canada Child Benefit and income thresholds.

RESP Contribution Limits

• Lifetime maximum: $50,000 per beneficiary (no annual limit)
• Optimal annual contribution: $2,500 to maximize the $500/year CESG
• Catch-up room: If you miss a year, you can contribute $5,000 the next year to get $1,000 in CESG (max one year catch-up at a time)
• Over-contribution penalty: 1% per month on amounts exceeding $50,000

RESP Withdrawal Rules

When the beneficiary enrolls in a qualifying post-secondary program, funds are withdrawn as Educational Assistance Payments (EAPs). EAPs consist of the government grants and investment growth, and are taxed as income in the student's hands. Your original contributions can be withdrawn tax-free at any time since they were made with after-tax dollars.

What Happens If the Child Doesn't Attend School?

• Transfer to a sibling: You can change the beneficiary to another child in the family
• Wait it out: The RESP can stay open for up to 36 years
• Transfer to your RRSP: Up to $50,000 of growth can be transferred to your RRSP (if you have room)
• Close the plan: Contributions are returned tax-free; growth is taxed at your marginal rate plus a 20% penalty; government grants are returned to the government