RESP Contribution And Grant Rules For 2014

by Mike Holman

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One of the main benefits of RESP accounts is the federal Canadian Educational Savings Grant (CESG). This grant is 20% of any eligible contributions in an RESP account.

How the RESP grant system works

Let’s say you open an RESP account for your bouncing new baby and contribute $1,000 into the account. Your financial institution will send the account and contribution information to the Canadian government for grant approval. If the grant is approved, the institution receives the grant money and deposits it into your account.

RESP Book

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The math

20% of the $1,000 contribution is $200, so you will now have an extra $200 in the account courtesy of the Canadian government. This basically gives you an extra 20% one-time return on your contribution.

Basic RESP contribution rules and numbers to know

  • $2,500 – Amount of annual grant-eligible contribution room accrued each year starting in 2007 or the year the child was born (whichever is later). The contribution room continues accruing up to and including the year when the child turns 17 years old. This amount is based on the calendar year and not the birth date.
  • $2,000 – Amount of annual grant-eligible contribution room accrued each year starting from the year the child was born or 1998 (whichever is later) up to and including 2006.
  • 20% – Amount of grant earned on an eligible contribution. For example: a $1,000 contribution would earn a grant of $200, if that contribution is eligible for a grant. There are additional grants available for lower income families.
  • $500 – Maximum amount of grant a beneficiary is eligible to receive for each calendar year from the year they were born or 1998 (whichever is later) to the year they turn 17 years old. This amount was only $400 for years prior to 2007.  A calendar year is from January 1st to December 31st.
  • $7,200 – Lifetime grant limit per beneficiary. If you contribute $2,500 every year, you will hit the maximum grant level in the fifteenth year, and no more grants will be paid to the beneficiary. This limit includes additional grants available to lower income families.
  • $50,000 – Lifetime contribution limit per beneficiary. Because there is no annual limit, you could potentially make one single contribution of $50,000 to an RESP if you choose.
  • Contribution room carry over. One of the great things about the RESP is that you can carry over unused contribution room into future years. However, there is a catch: Only one previous year’s worth of contributions can be used each year.
  • Contributions are not tax-deductible.  You won’t get a tax slip, and you can’t deduct RESP contributions from your taxable income.

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For example: If you start an account for your six-year-old child, you can contribute $2,500 (this year’s contribution room) plus another $2,500 (from previously unused contribution room) for a total of $5,000, to receive a grant of $1,000. You are allowed to contribute more than $5,000 in this scenario, but there will be no grant paid on the amount above $5,000. When calculating contribution room carryover from past years, don’t forget that the contribution limit was only $2,000 prior to 2007.

RESP contribution examples

Let’s do some examples to clarify exactly how this works.

Example 1 – Simplest example

Steve was born in 2010. His parents are broke, but one kindly grandmother decides to open an RESP account for him.

She opened the account in 2010 and has $2,500 of contribution room available. She contributes $1,500 to the account in 2010, so the RESP grant is $300 (20% of $1,500).

In 2011, she contributes $1,200, thereby qualifying for a $240 grant.

Example 2 – A more complicated example

Little Johnny was born in 2006. His parents decide in 2010 to set up an RESP account for him. They want to know how much money they can contribute each year to catch up on all the missed government grants.

Let’s add up the current contribution room.

2006 – $2,000 of contribution room

2007 – $2,500 (new rules)

2008 – $2,500

2009 – $2,500

2010 – $2,500

In 2010, the couple has $2,500 of contribution room for the current year plus $9,500 of contribution room from previous years.

Since the rule is that you can only contribute up to $2,500 of previously carried over contribution room each year in addition to the current contribution room, this means they can contribute this year’s amount ($2,500) and another $2,500 for a total of $5,000, which gives a grant of 20% or $1,000 for 2010. Since they only used $2,500 of their available $9,500 of carried over contribution room, they now have $7,000 in contribution room to carry over for the future.

  • In 2011, they can contribute another $5,000 for a $1,000 grant. $4,500 of contribution room is carried forward to the next year.
  • In 2012, they can contribute another $5,000 for a $1,000 grant. $2,000 of contribution room is carried forward to the next year.
  • In 2013, they can contribute only $4,500. $2,500 from the current year plus $2,000 they carried over from the past.
  • In 2014 and beyond, they can only contribute $2,500 each year and expect to receive the full grant of $500.

Summary of contributions they can make to get all the government grants:

  • 2010 – Contribute $5,000, receive $1,000 grant, $7,000 of unused contribution room
  • 2011 – Contribute $5,000, receive $1,000 grant, $4,500 of unused contribution room
  • 2012 – Contribute $5,000, receive $1,000 grant, $2,000 of unused contribution room
  • 2013 – Contribute $4,500, receive $900 grant, $0 of unused contribution room
  • 2014 and onward – Contribute $2,500, receive $500 grant

Please note there are special RESP contribution rules for 15, 16 and 17-year-olds.

RESP family plan contribution allocations

If you have a family plan with two or more beneficiaries, you need to allocate each contribution between the beneficiaries. For example, you might want to set up all contributions to be divided equally between the account beneficiaries. Or you might have a particular contribution that should be allocated to just one beneficiary. You must set the allocation so the government can track the grants for each child.

When you open an RESP account or add a new beneficiary to an existing account, you can set up the default allocation to split the contributions equally among the children on the account. If you want to make a contribution with a different allocation, you have to indicate this on the purchase order.

More detailed RESP information

Check out the RESP rules page for a list of more detailed RESP articles on this site.

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Want to learn more about RESPs? Buy The Book:

Resp-Book

The RESP Book: The Simple Guide to Registered Education Savings Plans

Everything you need to know about RESPs.

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{ 174 comments… read them below or add one }

101 Mike Holman

@Annie – You can only get gov’t grants on contributions up to the end of the year that the child turns 17. That is a government rule.

You can still make contributions after that age, but there won’t be any grants – so there isn’t much point.

102 Spring

One question for RESP contribution
My elder son now is 18 in 2011 (born in 1993). I contributed $2500/year from 2005 to 2009, but no contribution in 2010 (He was 17 in 2010).
Can I contribute $2500 now, only for 2010 contribution room to get grant(not for 2011 because no grant for 18 years old)? Or you must contribute some for 2011 together with 2010?
Thanks,
Spring

103 Mike Holman

@Spring – You’re too late. The year the child turns 17 (2010) is the last year he can get any RESP grants.

If you contribute any this year – there will be no grants.

104 JGN70

I just opened an individual (non-family) RESP for my niece. I am the subscriber for the plan.

The childs mother (primary Caregiver) would like to make contributions to this plan as well, Can she do this? or can only the subscriber make the Contributions

Thanks for a very informative site.

105 Mike Holman

@JGN70 – Anyone can make contributions, however a lot of financial institutions will only take cheques from the subscriber (ie in their name).

I would ask your financial institution.

106 Shabab

For instance, my child is now 8 years old. And his cost of education for four years will be approx. $80,000. How can RESP provide me that amount? Considering inflation and other factors.

Thanks!

107 Steve Star

If deposit$50,000 in my cild’sresp can I get the grant evryyear?

108 Dianne

What happens to any RESP contributions that are unused at the end of the child’s post-secondary education?

109 Mike Holman
110 mary grace aberin

I HAD A RESP CONTRIBUTION PUT ON INVESTMENT LIKE STOCKS, CAN I STILL GET THE GOVT GRANT AT THE END OF THE YEAR?

111 Mike Holman

@Mary – Yes.

112 Sherri

We have contributed about 12k into our two childrens resp’s in the last 10 years. The account is joint and we intend for each of them to have 1/2 of the available funds.
This year our son turned 17. We plan to contribute $5000 (from our LOC) before the end of the year and get the $1000 in grant money back when he enrolls & pays tuition, in a few months, (along with the $5k back) to pay off our LOC. )

BUT is there a way to contribute 10k (5k for each kid) and get the $10k back in a few months? and if so, I suspect that the $1000grant portion for the younger child would need to STAY until she enrolls…. We would just have to keep a tally of which kid got how much at home, to stay fair to each of them….
Is it a good strategy?

113 Mike Holman
114 Brigida Matienzo

We have our son’s resp since 2001 in Knowledge First Financial (formerly USC Education Savings Plan). If we transfer that resp to TD bank, is there any deduction from the money we contributed and accumulated from that plan? Another thing is , we only have one child and we have the family plan, we can change this anytime . Thanks in advance.

115 Jeff

Hi Mike,
I want to open a Family RESP. I have 3 kids, ages 5, 3, 1. Can you confirm my max contribution to get the grants based on the year they were born is as follows?
$5000 for my 5 year old for 2012 and one previous year going back to 2006.
$5000 for my 3 year old for 2012 and one previous year going back to 2008.
$5000 for my 1 year old for 2012 and 2011?
With the grant(s) totalling $1000 for each child?
Thanks!

116 Mike Holman

@Jeff – Yes. That sounds right.

117 Ray

Hi Mike,

Our family immigrated to Canada in mid 2003. In 2004 I setup RESPs for all 3 of my children and have been consistently contributing $2000 per year per child and later $2500 per year per child to obtain the maximum CESG amount possible each and every year.

Question: Does the prior year contribution room rule apply in my case ? i.e. could I catch up on contributions from 1998 onwards where relevant or does the contribution room only start from the year we immigrated to Canada which is later than when my children were born.

118 Mike Holman

@Ray – The contribution room only starts when you are a resident of Canada, so no you can’t go back to 1998.

Did you contribute for 2003? Partial residency years count as an entire year for RESP contribution room purposes.

119 John

Hi Mike. I really enjoyed your book. My daughter was born July 22, 2011. I opened her RESP at my local bank January 2012. I wanted to contribute $5000 (2500 for 2011 and 2500 for 2012). The sales rep. at my bank told me that I would only receive grant money for 2012, because that was the year in which my daughter turns one year, because of this I only contributed $2500. I was under the impression that I would receive grant money for 2011 and 2012. Could you shed some light on this.

Thanks in advance, I really enjoy your blog. Take care Mike.

120 Mike Holman

Hi John. Thanks for the nice words.

The bank teller is incorrect.

You can contribute $5,000 and get the grant for 2011 and 2012.

Mike

121 May

Hi Mike,
(sorry if you receive this twice- having issues with my pc)
I have 3 daughters who receive $600 annually in their RESP with Industrial Alliance.
They have each received $5000 today and I would like to place it into their RESP accounts.
I have read your ‘contribution rules’ and would like some clarification for our situation.
Since I they will continue to receive the annual $600 in 2012, my understanding is that I can put in an extra $1900 for a total of $2500.
How about for last year’s contribution? Since they already received $600, can I only put in another $1900 or the full $2500?
Thank you for your help.

122 Mike Holman

@May – When you say the girls “received” money, do you mean you made contributions into their account? Or are they getting payments from the RESP account?

123 Barry Lamont

I set up a RESP for my daughter back in January 2012. How long does it take for the government to issue the grant and Canadian Learning bond? It has been 2 months and I have not heard back from the government.

Thanks,
Barry

124 Mike Holman

@Barry – Normally the grants are paid out at the end of the month after the month in which the contribution was made.

I’m not sure if the fact that it’s a new account might delay things, but I don’t think so.

I would call your financial institution and see what they say. Alternatively you can call the HRSDC RESP division and ask them 1-888-276-3624.

125 Paul

Hello,
My daughter is in her 17th year. This year (2012) I contributed $5000. I have received $6000 so far in grant money, which includes this year 2012. Can I contribute another $6000 this year 2012 to get the last of the $1200 in grant money or am I done with getting any more grant money?
Thanks
Paul

126 Mike Holman

Paul, you can only contribute $5,000 in any one calendar year and get the full 20% grant on that money. Any additional contributions won’t get any grant.

127 Ken Shukla

If I contribute too much to the RESP, can I pull the money out in the same year? I put in $5K this year instead of $2500; can I pull out the $2500?

128 Mike Holman

@Ken – If you have contributed more than the lifetime limit of $50k then you can ask your financial institution to do a overcontribution refund.

129 ken

I have some contributions and received some grants. My child is over 18 now and taking post-secondary education and i withdrew some money for him from grants part. There is still some grant money left on the account. What will happen if I need to withdraw most or all my contribution money? Will I loose eligibility for grants received or to the part of that grants that are still on the account?
Will they be taken back by the government?

130 Mike Holman
131 Jane

Hi -I have a question – who can withdraw this money. If my child does not want to go to school can I get my money back – or does he/she get it when they turn legal age. My best friends son took out all his money – without her knowing it.

Jane

132 Sarah

Hi Mike. If (theoretically) I made a $50,000 contribution to my child’s RESP in the year he was born, would the total CESG he receives be limited to the $500 he would receive for that one year?

133 Mike Holman

@Sarah. Yes.

134 Erich

Hi Mike,
I contributed $250 to my son’s RESP on a monthly basis but I wasn’t aware of the government grant. Is it too late to claim the grant for 2007 – 2011?

Thanks

135 Mike Holman

@Erich – You should have been getting a grant on those contributions. Check with your financial institution.

136 sue

Hi, I put money for my son with USC ( Knowlege First)and it is now up to $ 34,222.00( not include the interest) It is not very much income because it is mostly in bond. I am just wondering how much money does my son need when he is going to University. He is going to be 12 in August 12 thank you

137 Laurie

My children both have RESP`s and I was making the contributions throught the same person who has my RRSP`s. What if I want to change that? Can I do the contributions myself or do they have to be done through a broker?

Laurie

138 Ann

Can RESPs be used toward overseas volunteer organizations?

139 Mike

Hello,

We came to Canada in 2005 March , my daughter is born in 11/1995 , how much can i contribute to max out her grants?When is the deadline to pay the arrears to get the previous years grants?

140 Laura

Hi Mike.
My ex has just transferred our son’s resp to another plan. I was the joint subcriber and primary caregiver. Did they not need me to sign for the transfer. They refuse to give me any information??

141 Mike Holman

@Laura – Yes, they need you to sign for the transfer.

Call them again and escalate if you have to.

142 Ron

My son who will turn 18 years next month wants to set up an RESP account of $50.00 per month for his Godson (His cousin’s son) who is just a few fews weeks old. How can he go about this.

143 Mike Holman

@Ron – This article has some advice about setting up an account:

http://www.moneysmartsblog.com/safest-simplest-cheapest-resp-account/

144 New to this...

Hi Mike,

If I put $2000 in TD e-series and $500 in GIC (to get additional grants), would I still receive the 20% for the total $2500? Also when its time to withdraw, can my child withdraw all of the EAP after the first 13 weeks and withdraw the PSE later?

Thanks

145 Mike Holman

@New to this:

Yes, Yes.

146 Div and RESP ...

Hi Mike,
Great site, learning a lot from your blog!
I was wondering if you ever considered dividend funds within an RESP?

My situation: I have two funds (one dividend provider once per yr) the other is a growth fund (higher risk and returns but with no dividend) :-(

My question: Within and RESP it is free to transfer from one fund to another. So why don’t I transfer most of my non-paying fund to the dividend paying fund just prior to redistribution and after redistribution to re-balance both funds.

My conclusion: According to my conservative calculations over a 12-15 yr period just doing this transfer back and forth each year, can make me 4-5 KCAD extra (in redistributed shares within my dividend paying fund). Another way I like to look at it, it is like getting 2 extra years contribution the max for free.

Am I correct in my conclusions?
Thanks again for all the tips and advice…

147 Mike Holman

Div & RESP – Not sure I understand your strategy. Are you saying you will move all the money into the div fund prior to the distribution and then move part of it back to the growth fund?

It won’t work – the div fund should go down in value by about the amount of the paid dividend, so you won’t be further ahead.

148 May

Hi Mike,
Is there a limit on how much you can take out from the RESP for the first year. I remember reading something about the amount cannot exceed $5000 for the first year, is this true?

149 Div and RESP ...

hi Mike,

Thanks for the quick reply…perhaps an example would make it clearer….

Say in yr 1, you move everything(8K CAD for example) into the div. fund and then get the re-investment(so say 6 shares at 20 CAD per share). Once you receive the re-investment then you transfer back the 8K to the growth fund.

So 8K is swapped back and the dividend fund keeps the additional 6 shares before the free swap. If you grow both funds by the max for 10 yrs, and do this swap every year, you get close to 4-5K additional shares in the dividend fund.

Makes sense?

150 Mike Holman

@May – Read this page for withdrawal info: http://www.moneysmartsblog.com/resp-withdrawals/

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