Registered education savings plan rules

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registered education savings plan rules

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What is a RESP Registered Education Savings Plan

Registered Education Savings Plan (RESP)

The amount you will receive depends on your income. Interest from investment income in an RESP is not taxed. You can open an RESP for your child or another family member who is under After high school, if your child is enrolled in an eligible college or university program, they will receive this money to cover some or all of their education costs. RESPs are offered through banks, credit unions and other financial institutions. RESPs have different restrictions and structures, so it is a good idea to look at different options and to ask questions before you open one.

The rules provide a special tax on certain advantages that unduly exploit the tax attributes of an RESP, as well as special taxes on prohibited investments and on non-qualified investments. A registered education savings plan RESP is a contract between an individual the subscriber and a person or organization the promoter. Under the contract, the subscriber names one or more beneficiaries the future student s and agrees to make contributions for them, and the promoter agrees to pay educational assistance payments EAPs to the beneficiaries. There are two different types of RESP available: family plans and specified plans. You will not receive a reply. Skip to main content Skip to "About government". Report a problem or mistake on this page.

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The following information is from the Government of Canada Website. Anyone—parents, grandparents, other family members and friends—can open an RESP for a child. RESPs can be opened by one person or opened jointly by spouses or common-law partners.

RESPs are registered education savings plans 1 that grow tax-deferred until beneficiary withdraws funds for post-secondary education. Students usually pay little or no tax on those funds when withdrawn as RESP contributions are nontaxable and students are at lower income tax rate. Grant amounts are not included in the lifetime RESP contribution limit. The Canada Education Savings Grant 2 is a grant from the Government of Canada paid directly into an RESP that provides between 20 and 40 cents for every dollar saved for a child's education, depending on your income. That's a major plus along with earnings that grow tax-deferred until the child is ready for post-secondary education. There is usually little or no tax on those funds when withdrawn as RESP contributions are nontaxable and students are at lower income tax rate.

An RESP is a tax shelter designed to benefit post-secondary students. With an RESP, contributions comprising the investment's principal are, or have already been, taxed at the contributor's tax rate, while the investment growth and CESG is taxed on withdrawal at the recipient's tax rate. An RESP recipient is typically a post-secondary student; these individuals generally pay little or no federal income tax , owing to tuition and education tax credits. Thus, with the tax-free principal contribution available for withdrawal, CESG, and nearly-tax-free interest, the student will have a good source of income to fund their post-secondary education. Any contributions over this amount are subject to taxation. The Alberta Centennial Education Savings ACES grant was introduced in by the Alberta government to encourage families to begin planning and saving for their children's post-secondary education.

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  3. Dieter G. says:

    A Registered Education Savings Plan (RESP) in Canada is an investment vehicle available to . as income unless it is rolled into a registered retirement savings plan (RRSP), subject to individual contribution limits and applicable rules .

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