Saving for school with an RESP

A registered education savings plan (RESP) is a way to save for a child’s education after high school. You can’t deduct what you put in, but the investment income isn’t taxed while it stays in the plan, and the federal government can add grants. When the student takes money out for school, the growth and the grants are taxed as the student’s income, not yours.

How it works

You (the subscriber) set up the plan with a promoter and name the future student as the beneficiary. You contribute; the promoter manages the money and makes payments under the plan’s terms.

• Going in: your contributions aren’t deductible. Interest on money you borrow to contribute isn’t deductible either.
• While it’s invested: income earned in the plan isn’t taxed as long as it stays there.
• Coming out: your own contributions can come back to you tax-free, or be paid tax-free to the student. The investment income and government grants are paid to the student as educational assistance payments (EAPs), which the student reports as income for the year they receive them.

Before you can contribute for a child, the promoter needs the child’s social insurance number, and the child must be a resident of Canada.

How much you can put in

There’s no annual limit, but there is a lifetime limit for each beneficiary that counts every contribution by anyone, to every RESP for that child, including grandparents and other relatives. Government grants don’t count toward it. The CRA’s RESP contributions page gives the limit.

If total contributions go over the limit, each subscriber owes a tax for every month their share of the excess stays in the plan. Withdrawing the excess stops the tax, but withdrawn amounts still count toward the lifetime limit.

There are time limits too: an RESP generally can’t accept new contributions (other than transfers from another RESP) after the end of the year that includes its 31st anniversary, and it has to wind up by the end of the year that includes its 35th anniversary.

The federal grants

Canada Education Savings Grant (CESG). Employment and Social Development Canada pays a grant into the RESP equal to a percentage of what you contribute each year, up to a yearly and a lifetime maximum. Every family gets this basic grant, whatever its income. Lower- and middle-income families also get an additional grant on the first part of each year’s contributions. For 2025, the CRA’s chart shows the larger additional grant when adjusted family net income is under $57,375, a smaller one between that and $114,750, and none above that.

• Grant room builds up each year for every child under 18 who is a resident of Canada, and unused room carries forward, so you can catch up later, within a yearly cap.
• Grants are paid on contributions up to the end of the year the child turns 17. For a child who is 16 or 17 to get grants, the RESP must already have received either a minimum total, or a minimum contribution in at least four earlier years, by the end of the year the child turned 15, so start saving before then.

Canada Learning Bond (CLB). Children from low-income families born in 2004 or later may qualify for this extra amount, paid straight into their RESP. You don’t have to contribute anything to get it. The beneficiary must be under 21 when the bond is applied for, and young adults can open an RESP and request it themselves.

Some provinces also pay their own education savings incentives into an RESP. If the beneficiary doesn’t go on to post-secondary education, the CESG and CLB go back to the government.

Taking money out for school

The promoter can pay EAPs once the student is enrolled in a qualifying post-secondary program, or is 16 or older and in a specified educational program; the CRA sets minimum lengths and hours for both. EAPs can continue for up to six months after the student stops attending, as long as they would have qualified just before.

In a qualifying program, there’s a cap on EAPs during the first 13 consecutive weeks and no cap after that while the student keeps qualifying (a separate cap applies to specified programs). The promoter can also pay out some of your contributions to the student tax-free at the same time.

If nobody uses it for school

You have several options:

• Take back your contributions. They come back to you tax-free.
• Transfer it to another RESP. Transfers to a plan with a common beneficiary, or in certain cases to a brother or sister, have no tax consequences.
• Take the income as accumulated income payments (AIPs), if the plan allows them. Usually the plan must have been open past the year of its 9th anniversary, and every beneficiary must be at least 21 and not eligible for EAPs. AIPs are taxed at your regular rates plus an additional tax (at a lower rate for Quebec residents).
• Move the income to your RRSP. If you’re the original subscriber and have RRSP room, contributing to your RRSP or a spousal RRSP reduces the AIP subject to tax, up to a lifetime maximum.
• Roll it into an RDSP. If the beneficiary also has a registered disability savings plan and meets certain conditions, the income can be rolled over to it without immediate tax.