Top 5 questions about family RESPs + MORE Dec 4th

At year-end and during tax season, parents and grandparents may have questions about registered education savings plans (RESPs) and their impact on taxes in Canada: Are RESP contributions tax-deductible? Who pays the taxes on RESP withdrawals?

First, a quick refresher on these registered accounts: RESPs provide a tax-advantaged way to invest in your children’s or grandchildren’s future education. Contributions to an RESP account and investments held in an RESP are tax-sheltered as long as they remain inside it. And that’s not the only benefit of opening an RESP. The Canadian government also contributes by matching grants to your child’s RESP through the Canada Education Savings Grant (CESG). (More on government grants below.)

Maximizing RESP contributions and understanding withdrawal rules can save you a lot in taxes while you save for your child’s or grandchild’s post-secondary education. Let’s look at common questions in more detail.

Is an RESP tax-deductible?

Unlike with a registered retirement savings plan (RRSP), RESP contributions themselves do not give you a tax deduction…

If you’re saving up for a child’s post-secondary education, a registered education savings plan (RESP) can’t be beat as a savings tool. No other plan or account in Canada will give you access to thousands of dollars in government grants—free money for your kid’s future tuition and other educational expenses. RESPs also offer tax-deferred growth for your savings and investments. And, if you have more than one child or grandchild, you can benefit from the added flexibility of a family RESP.

What is a family RESP? 

Canadians can choose from two types of RESPs: individual and family. Both are registered accounts, meaning that they’re registered with the federal government, and they allow your savings and investments to grow on a tax-sheltered basis. 

Here are the key features you should know about for both types of RESPs:

The lifetime RESP contribution limit per beneficiary (child) is $50,000. A beneficiary can have more than one RESP (for example, if a parent opens one and a grandparent opens one), however, the maximum contribution is still $50,000…

Ask MoneySense
I have $66,000 unused RRSP contributions for the 2023 tax year (unused deductions, not unused contributions).

My plan is to start my RRSP withdrawals in January 2025, and to start claiming the unused deductions on my 2025 taxes, when most likely it will be over $70,000. In 2025, I will be 66 years old.

What is the last tax year I still can claim unused deductions? Is it 2029 or 2030?

—Svetla

First, what are RRSP contributions and RRSP deductions?

Before delving into your question, Svetla, it may be helpful for other readers to highlight the difference between registered retirement savings plan (RRSP) deductions, deduction limit, contributions and contribution limit. They can be a cause of confusion.

When you contribute to an RRSP, you must claim the contribution on your tax return for the year. That is, you report the fact that a contribution was made. You do not, however, have to deduct that contribution. You can choose to carry it forward to claim in a future tax year…

You’ve likely heard the saying “It takes a village to raise a child.” Well, with the cost of college and university tuition rising every year, it just might take a village to pay for post-secondary education, too. That’s where grandparents can help with registered education savings plans (RESPs). If you’re in the fortunate position of being able to help your grandchild save up for their future schooling, what’s the best way to go about it?

The best way to save for school: Open an RESP

Ideally, your grandchild or grandchildren will have an RESP. Perhaps your own kids have already opened one for them. If not, you can open an RESP—in fact, anyone can become a “subscriber,” including parents, guardians, grandparents, other relatives, and friends. A child can be the “beneficiary” of multiple RESPs, but here’s the key detail to note: the lifetime RESP contribution limit per child is $50,000. Any excess contributions will be taxed, so it’s important for contributors to coordinate their efforts…