What tax rules apply to an RESP?
You will not be taxed on the amount you contributed to the RESP, but you will have to pay taxes on the money that you earned in your plan as interest. This money is called “accumulated income.” It will be taxed at your regular income tax level, plus an additional 20 percent.
Can I withdraw my RESP if I leave Canada?
In summary, Cara, leaving Canada does not necessarily negate the benefit of a RESP account. It means your contributions must stop if the beneficiary is a non-resident and may result in repayment of grants or withholding tax if withdrawals are taken while a beneficiary is non-resident.
Can you claim RESP on taxes in Canada?
Yes, you will claim this as part of your income. The income is not on the amounts that were contributed to the RESP, but only on the Canada Education Savings Grant(CESG) and income earned (income earned on grant and contribution) over the years.
What are the rules for RESP?
You can contribute to an RESP for up to 31 years, and the plan can remain open for a maximum of 35 years. Under the CESG, the government matches 20% on the first $2,500 contributed annually to an RESP, to a maximum of $500 per beneficiary per year. The lifetime maximum per beneficiary is $7,200, up to age 18.
Why are RESP withdrawals taxable?
How is the Money in an RESP Taxed? No taxes are paid on EAP money until it is taken out of the RESP account. When it is withdrawn, the EAP is looked at as taxable income for the student. The good news is that most students don’t earn enough income to pay very much income tax (if any at all).
Is RESP tax sheltered?
To start, the RESP is a tax-sheltered savings tool. That means that while the money is in the RESP, you don’t have to pay any taxes on the government grants and investment earnings. Remember that their income has to be above a cut off level to be taxed, and students often don’t make more than the cut off.
What happens to RESP if you leave Canada?
An RESP withdrawal of accumulated income for a non-resident will be subject to withholding tax. Withholding tax for a non-resident is generally 25% of the accumulated income on the withdrawal. Maintaining a Canadian RESP account for a non-resident of Canada may have some benefits, but also drawbacks.
What happens to RESP money if not used?
The money that was contributed to the RESP over the lifetime of the plan may be withdrawn and returned to the subscriber. Contributions withdrawn are not subject to any additional tax. The subscriber can also elect to receive the income earned in the form of an Accumulated Income Payment (AIP).
How do I report a RESP on my tax return?
RESP Growth Any money contributed to the RESP for your daughter or son grows tax-free within the account. That means as long as you don’t touch it, you don’t have to include any income on your tax return. It doesn’t get any simpler than that! Again, there’s no tax reporting needed at this point.
Who claims RESP income?
Any federal or provincial incentives (grant/bond) in the plan will be returned to the government if an RESP is collapsed; however, any investment income (up to $50,000) that was made within the RESP can be rolled into your RRSP on a tax-deferred basis provided you have the RRSP contribution room.
What can I do with leftover RESP money?
How do I report a RESP on my taxes?
An RESP is considered an educational assistance plan and the interest you receive from it must be shown on your tax return as income earned. The carrier of the RESP sends you a T4A that shows the amount you received.
Who is a beneficiary of a resp in Canada?
RESP (Registered Education Savings Plan) Canada is a savings plan that is registered by the Government of Canada to allow savings for a child’s education to grows tax-free until the child is ready for his/her post-secondary education. The child named in an RESP is known as a beneficiary.
Is the income from a resp taxable in Canada?
These grants can be the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), or any designated provincial education savings program. The promoter of the RESP administers all amounts paid into the RESP. As long as the income stays in the RESP, it is not taxable.
How are lifetime limits set for resp in Canada?
The Canada Revenue Agency registers the education savings plan contract as an RESP, and lifetime limits are set by the Income Tax Act on the amount that can be contributed for each beneficiary (see Contribution limits ).
When do I have to contribute to my resp?
Unless the RESP is a specified plan, the RESP must provide that no contributions (except transfers from another RESP) may be made to the plan at any time after the end of the year that includes the 31st anniversary of the opening of the plan.