How much money does the Government of Canada contribute to a RESP?
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- Updated On:29-Nov-2022
- Replies:1
Short Answer
The government offers grants such as The Canada Education Savings Grant (CESG and Canada Learning bond (CLB). Continue reading to know more about government contributions.
Detailed Answer
RESP Canada
RESP is an abbreviation of Registered Educational Savings Plan. It is a form of investment account that is registered with the federal government of Canada and it is intended to accumulate money for post-secondary education.
The funds within RESP can be invested in shares, bonds, ETFs, GICs or mutual funds. The earnings within the plan be it interest, dividends, or capital gains are not taxed within RESP. Let us find the contribution rules of RESP.
Contribution Limits of RESP
One can contribute to the RESP of a particular beneficiary for 31 years and the RESP can be kept untouched for 35 years. For the contributors, there is no annual contribution limit, however, a total contribution of $50,000 can be made during the lifetime of RESP.
In case of overcontribution, the beneficiary must pay 1% tax every month the overcontributed amount is retained within the RESP.
How much money does the Government of Canada contribute to a RESP?
The Canada Education Savings Grant (CESG) is paid into the RESP of any beneficiary who is below 18 years of age by the government. The government contributes 20% of your contribution into your RESP capped at $500 per year and $7,200 in lifetime.
Canada Learning bond (CLB) is offered by the employment and social development Canada. To qualify for this the beneficiary must belong to a family that is earning low income, plus he/she must be born on or after 1st January 2004. In the first year a CLB grant of $500 is deposited. After this, a re-assessment of qualification is done every year and if the beneficiary is qualified $100 is credited. The maximum grant is capped at $2,000.
Government contribution into RESP Canada
Given the tax advantageous nature of RESP Canada, it is logical of the government to claim refund of the grant, if the contributed funds are not used for education, tuition fees, rent, transport or purchase of textbooks.
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Discussion (0)
There are various benefits of contributing into a RESP. These include tax advantage, receiving of government grant, available investment options etc.
Contributing to a Registered Education Savings Plan is worthwhile if you are certain that the money contributed will be used for higher education of the beneficiary. Let's catch up with some more details.
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You will save a considerable amount on conversion fees, by following the Norbert's Gambit. Our calculations suggest that you can save around $2,100 CAD for converting $100,000 CAD into USD.
The contribution conditions within TFSA differs from circumstance to circumstance. Let's figure out in details how TFSA works for Canadian investors.
Yes, international Yes, international students can have two or more bank accounts in Canada as per their discretion. There is no cap on the upper limit.
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No, you cannot open an investment account in Canada while you are a Non-resident, the exemption being - Tax-Free Savings Account (TFSA). Having said that, you can continue to hold the investment accounts that you once opened while you lived in Canada.
Registered Educational Savings Plan is a tax advantageous investment plan registered with federal government of Canada. This is used to accumulate funds for higher education.