Do You Claim RESP on Taxes in Canada?

Do You Claim RESP on Taxes in Canada


Most Canadian parents and guardians prefer an RESP when saving for their child's education. It is a treasury product dedicated to saving for post-secondary educational costs for children. However, with this said, there is usually much confusion, yet it is very popular. How would that affect the deduction on your tax return? Here are some of the tax benefits you get from the use of an RESP. The blog has taken the responsibility to explain very carefully and give you a view of how these work.

What is an RESP?

Before delving into mechanics, it is most important to find out what an RESP is. An RESP is a tax-advantaged saving plan. It is government-sponsored and designed to encourage saving for a child's post-secondary education and tax-deferred growth. A unique feature of an RESP, compared to many other saving plans, is that it gives you the option to access the Canada Education Savings Grant (CESG). This is where the government puts in an amount equal to 20% of all your annual contributions to an RESP, to a limit of $500 per year. This is to a lifetime bar of $7,200 that they can contribute for each qualifying beneficiary.

RESP Contributions

An RESP is funded by after-tax money. You paid the taxes to have the money with which you contributed to the plan. The most important point to note, however, is that you do not deduct these contributions on your tax return. RESP contributions are not tax-deductible, unlike the Registered Retirement Savings Plan (RRSP).

Taxation of the RESP Growth

Money invested as income in an RESP is not taxed. The best part about the RESP is that the money growing in the plan is not currently taxed. You will not pay any tax on the earnings within the RESP as long as they stay in the plan. The ability to accumulate earnings in a tax-free environment over time can significantly enhance the growth of your savings.

Withdrawing from an RESP: Educational Assistance Payments (EAPs)

When the beneficiary is in a qualifying post-secondary student program, the money invested in the RESP can be withdrawn to support them in their studies. These withdrawals are known as Educational Assistance Payments (EAPs). EAPs include the CESG and any income generated within the RESP. Interestingly, the student, and not the subscriber, owes tax on this money. Since most students have no or low income, these funds can usually be withdrawn by the student tax-free or at a very low tax rate, as a result of their personal tax credits.

RESP Contributions and TFSA Parallels

The RESP can be compared with the Tax-Free Savings Account (TFSA), where contributions are made with after-tax dollars and are not tax-deductible. The catch is that on withdrawal, any gains or contributions arising in the account are not taxed, unlike in the case of RESP. Both this and the features of the RESP—where the contributions are also made using after-tax dollars and the EAPs—.

This difference throws into relief the fact that the RESP is a tax-deferred savings vehicle meant first and foremost as a support to education. The TFSA vehicle, on the other hand, may be used to meet any long-term savings objective.

The Impact of RESPs on Taxes

So, to address the primary question: No, you do not claim an RESP on your taxes in the same way you might with an RRSP. However, the RESP does provide tax advantages through deferred growth and the potential for tax-free or low-tax withdrawals by the beneficiary.

Closing Thoughts on RESPs and Taxes

The Registered Education Savings Plan offers Canadian families a fantastic way to save for education while enjoying tax benefits. While contributions to an RESP are not tax-deductible, the plan's tax-deferred growth and the taxable nature of withdrawals when they are counted as income to a typically low-income student make it a powerful tool in educational planning. When considering opening an RESP, it's wise to request a Registered Education Savings Plan Quote to understand the potential growth and benefits for your specific situation. Remember, each Registered Education Savings Plan for Canadians is tailored to the needs of the subscriber and beneficiary, ensuring that future educational needs are met with as little financial strain as possible. If you are saving for your child's learning, then this personalized insight and planning from a financial advisor will help you realize the maximum value of each dollar that is saved in an RESP.
Location: Brampton, ON, Canada

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