RESP Contributions & Tax Planning for Education

Saving for your child’s education doesn’t have to feel overwhelming. The Registered Education Savings Plan (RESP) is one of the most powerful tools available to Canadian parents—especially when combined with smart tax planning.

When used correctly, an RESP can turn a small yearly contribution into tens of thousands of dollars for college or university.

Here’s a simple guide to how RESP contributions work and how to get the most out of them.

1. What an RESP Actually Is

An RESP is a special investment account designed to help pay for your child’s post-secondary education.

The big advantage?
The government helps you grow this money through grants and tax-free investment growth.

Key features:

• You can contribute up to $50,000 per child.

• The government adds 20%–40% on top of your contributions (CESG + CLB).

• The money grows tax-free inside the account.

• Taxes are paid later by the student—who usually pays almost nothing.

2. How the RESP Government Grant Works (CESG)

The Canada Education Savings Grant (CESG) is the biggest benefit.

You get:

• 20% grant on your annual contributions

• Up to $500/year

• Lifetime maximum $7,200

Example:

If you contribute $2,500 per year, the government gives you $500 every year.

If you can’t contribute every year, the RESP allows catch-up room, so you can get up to $1,000 in grants in a single year.

3. Extra Money for Lower-Income Families (CLB)

The Canada Learning Bond (CLB) gives families with lower income an extra boost:

• Up to $2,000 per child

• No contributions required to receive it

Many families are surprised to learn they qualify—over 40% of eligible children are not enrolled.

4. How RESP Contributions Help With Tax Planning

RESPs themselves don’t give you a tax deduction (unlike RRSPs),
but they save you tax in three powerful ways:

1. Tax-free growth inside the account

Interest, dividends, and investment growth are sheltered.

2. Student pays the tax later

When your child withdraws money for school:

• Grants + investment growth are taxed under the student’s name

• Students often pay zero tax because of low income and tuition credits

3. You can reduce family income for benefit programs

This helps families receiving:

• CCB (Canada Child Benefit)

• GST/HST credit

• Provincial benefits

Because RESP contributions don’t count as a deduction, they don’t reduce your benefit amounts the way RRSP withdrawals or other income might affect them.

5. How Much Should You Contribute?

To maximize grants efficiently:

✔ $2,500 per year per child
This gives you the full $500 CESG annually.

If you can’t do $2,500, even $50 per month is better than doing nothing.

If you missed previous years, contribute $5,000 to get $1,000 in CESG (catch-up).

6. How RESP Withdrawals Work for School

When your child goes to college, university, or trade school, they can withdraw:

1. Contributions (your money)

Tax-free, anytime.

2. Grants + growth (EAP – Educational Assistance Payments)

Taxable to the student, not you.
Because students typically have low income, they normally pay little or no tax on EAP withdrawals.

7. What If Your Child Doesn’t Go to School?

You still have options:

• Transfer RESP growth into your RRSP (up to $50,000 if you have room)

• Transfer RESP to another child

• Keep the RESP open for 36 years

• Contributions are always returned tax-free

• Grants may need to be returned to the government, but investment growth remains yours

So the money never disappears—you have choices.

8. Smart Tax Planning Tips for RESP Success

✔ Open the RESP early

More years = more growth and more grant room.

✔ Automate small monthly contributions

This builds consistency and ensures you don’t miss grants.

✔ Combine RESP with RRSP planning

Parents can reduce their income with RRSP contributions while growing education savings tax-free inside the RESP.

✔ Review your plan every year

Income changes, grants, and eligibility can shift.

✔ Keep track of contributions

Avoid exceeding the $50,000 lifetime limit.

Final Thoughts

RESPs are one of the most valuable financial tools for Canadian families. They combine tax-free growth, federal grants, and flexible planning to help your child graduate with less debt and more opportunity.

Whether you contribute a little or a lot, starting early and staying consistent can turn small savings into a major education fund.