This post is part of the Big RESP Series. See the entire series here.
RESP contributions are not complicated but there are a number of rules and limits. I’ll go through some of them and then do a couple of common examples.
RESP Contribution Limits and Amounts
These resp rules are as of 2010 – I’ve enclosed some of the old limits in (brackets) because they still apply as far as contribution room for past years.
$50,000 = Lifetime contribution limit per beneficiary. Because there is no annual limit anymore you could potentially make one contribution of $50k to a resp if you chose (and if you had the money).
$7,200 = Lifetime grant limit beneficiary. This amount corresponds to 18 times $400 which used to be the maximum annual grant allowed per beneficiary.
20% = Amount of grant earned on an eligible contribution. Ie a $1000 contribution would get a grant of $200 if that contribution is grant eligible.
$500 ($400 old rules) = Amount of grant a beneficiary is eligible to receive for each year from the year they are born or 1998 (whichever is later) to the year they turn 17. This amount can’t exceed the $7,200 lifetime grant limit.
$2,500 ($2000 old rules) = Amount of grant-eligible contribution room which is eligible to receive a grant for each year from the year they are born or 1998 (whichever is later) to the year when they turn 17.
1 = Number of previous year’s worth of grant-eligible contribution room which can be carried forward to the current calendar year. Basically this means that for any given year, the maximum amount of grant-eligible contribution room is the amount that is allocated for that year ($2500 starting in 2007) plus the grant-eligible contribution room unused from a previous year.
$0.00 – Amount of grant earned on any contributions which exceed the amount of grant-eligible contribution room for that particular year.
Maximum age you can contribute to an RESP:
- Individual plan – up to end of 21st year of plan’s existence.
- Family plan – for each beneficiary – must be made before beneficiary turns 22.
Note that all contributions made after the year when the child turns 17 will not be grant-eligible but they will be tax sheltered so it can still be worthwhile to make contributions in years after the child is 17.
Confused? You should be!
Let’s do some examples to clarify exactly how this thing works.
- Little Johnny was born in 2005, the parents decide in 2007 to set up an resp account for him. They want to know how much they money they can put in to catch up on the government grant for this year and how much the maximum they can put in to get the full grant in years going forward.
First of all, let’s add up the current grant-eligible contribution room according to the rules above.
2005 – $2000
2006 – $2000
2007 – $2500 (new rules).
So the couple has $6500 of grant-eligible contribution room but since the rule is that you can only contribute one year of previous grant-eligible contribution room in one year in addition to the current contribution room , that means they can contribute this year’s amount ($2500) and a previous year’s ($2000) for a total of $4500 which gives a grant of 20% or $900. Since they only used $4500 of their available $6500 of grant-eligible contribution room that means they have $2000 of room left over for the next year.
In 2008 the same logic applies. The grant-eligible contribution room for 2008 is $2500 and since they can carry forward a previous year’s unused contribution room ($2000) their limit this year is also $4500.
In 2009 there is no grant-eligible contribution room leftover from previous years so their limit to get the maximum grant is $2500.
Example 2
- Little Janey was born in 2007 and the parents set up an resp in 2007, contributed $1000, then in 2008 they contributed another $1000. In 2009 they received an inheritance and decided to make a lump sump contribution to the resp. They want to know what the maximum amount they can contribute and how much grant will they get with that contribution?
Let’s look at the grant-eligible contribution room for each year:
2007 – They were eligible to contribute up to $2500 and receive the full 20% grant. Since they only put in $1000 there is $1500 of unused room that can be carried forward.
2008 – Again they can contribute $2500 for 2008 plus the $1500 from the previous year. Since they only contribute $1000 then they have $1500 of unused room for 2008 and $1500 of unused room from 2007.
2009 – The annual grant-eligible amount here is $2500 and they can use up to the maximum amount in a previous year ($2500). Since they have $3000 of unused room from previous years, $2500 will get used. Any other contribution on top of the grant-eligible amount will be accepted but no grant will be paid. In this case they have $5000 of grant-eligible room which means they will get $1000 worth of grant ($5000 times 20%).
As to how much they can contribute in total, we have to look at the lifetime limit and subtract the contributions made so far.
The life time limit is $50,000 and they contributed $1500 in 2007 and 2008 so going into 2009 their life time amount remaining was $47,000.
Answer – they can contribute $47,000 and they will get $1000 of grant in that year.
In the next Big RESP Series post we’ll take a look at RESP additional grants that are available.
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I am here to seek advise from you.
I am really confused with RESP ,I have been shopping around last few days.
Spoken to Heritage funds RESP,Children Education Funds RESP, and TD bank.
I am not able to decide which one should I go for .
Are Banks good or these non profit organizations.
My kid is only 10 months , want to do it before she turns 1year.
I would appreciate as much advise i can get.
Cheers
Hitz
Stay away from the group resps – they are not “non profit” – far from it.
Banks are fine although watch for fees. TD efund is the best one as long as you are just getting the normal cesg payment.
http://www.four-pillars.ca/2007/11/23/resp-how-to-get-started/
My wife and I have 3 kids. We have our oldest in a group RESP right now with CST, and the others with nothing so far (a toddler and infant). Would it be better to start a self-directed RESP thru the bank for the other two, or add them to the group plan, making that a family fund? Are there any drawbacks (now or down the road) to either?
As for using up a prior year’s unused contribution room, how do you go about electing a certain year (i.e. are there any forms to fill out to designate a year)? Is it always the calendar year, and does it go from when the plan was started, or is it just based on the child’s age? I guess what I’m asking is will I be able to make up the grant room for my other two kids if I haven’t started up a plan for them to date? We don’t even have a SIN card for one child yet. Thanks in advance!
Hi KRB – I’m not a fan of group resps because of their high fees and restrictive rules so personally I would stay away from them.
Self-directed is the way to go. The family account is ok for convenience but it doesn’t really make that much difference.
The contribution room is always calculated according to the birthdate so you don’t elect a year – you just make the contribution and make sure you don’t go over any limits.
The ad with the teaser GOC cheque at the top of the 2009 RESP page is repulsive. Otherwise, am enjoying your site (saw the touts in the weekend G&M).
Just a short question. Does the party that makes the RESP contribution on behalf of the child get a tax rebate for the tax year they make the contribution?
Cheers,
Brian
Brian – no tax rebate for RESP contributions.
Does anybody know if there’s a way to find out the current total RESP contribution made to date on a particular beneficiary?
my daughter is at a university in the us. we bought her a laptop. can this be claimed through resp?
namsilat – the HRSDC keeps track of all contributions/withdrawals.
Al – yes.
I have two children – 18 and 13 both have RESP’s — My 18 year old can no longer get grant money – but has some scholarship money $5,700 that I would like to get grant money on. The 13 year old has plenty of room is his RESP, so I’m wondering if I put this money into the 13 year olds RESP -will the 20% grant be paid into the 13 year olds fund? If so once it’s there can I then transfer the whole amount $6,840 into the 18 year olds RESP account?
Thanks in advance
Ken
Ken – I’m not 100% sure about this one but I don’t see why you can’t put the money in the 13 yr olds account and then transfer to the 18 year old.
I would check with the HRSDC as well as the institution where the accounts are held to make sure it’s ok.
I’m assuming the kids have individual accounts? You might have to put them into a family account to make this happen.
Another thing to remember is that there is a $7200 lifetime limit for grants. If the 18 year old has already received his limit then there is no point in doing this since the grants won’t be able to be transferred.
My son is 17 this year 2009 and will be attending university sept 2010. We opened an family resp for both of our children in 2006 but have not made any contributions in the past 3 years. How much can we contribute this year and will grants be applied , if we contributed the maximum we are allowed.
thanks
Heather
Heather – I’ll need more info.
How much did you contribute toward the 17 year olds resp in 2006 and 2007?
For these contributions – are you asking about both kids or just the older one?
2000.00 each year for both children
Ok – the rule is that if you haven’t contributed $2000 by the end of the year where the child turns 15 (2007 in the case of your son) then you can’t get any grants for that kid in subsequent years.
In your case it sounds like you met this condition so you should be ok to get more grants in your son’s account.
The highest grant amount you can get for this year is $1000 for your son. You will have to contribute $5000 to get this grant. You are allowed to contribute more than $5k but you won’t get any grant on that extra amount so it’s not worthwhile doing.
The same will apply to your daughter assuming she is younger.
Hi,
I have been contributing to my son’s RESP account of $2,500/year in each of 2007 and 2008. I am going to contribute another $2,500 this month. My son is 16. He turns 17 on July 2010.
Question: Am I able to contribute another $2,500 in 2010 and be entitled to the grant? If so should the contribution be paid before his 17th birthday during July 2010?
Question: If the subscriber is the father can the contributions be taken out of the grandmothers account?
Denise – You should be able to do this. My Mom has a regular contribution set up for my kids resp where the money comes out of her account. The subscribers of the account are my wife and I.
Is there a minimum that must be contributed before the govt. gives that 20% grant? Or will it even be given on, say 50 dollars, if that is all that is contributed the first year. And when is the grant money paid. Yearly or monthly?
Hi Momma…I hope the “14″ doesn’t refer to your age!
There is no minimum that I know of for the government, however most financial institutions might have their own minimums for purchases.
There isn’t a set schedule for grant money. Once the purchase is made the financial institution sends the info to the government, once the government approves it then the grant money is used for an additional purchase (20% of the original). I’m not sure how long the lag time is – maybe a month or so?
Hi,
Your information above :
$2,500 ($2000 old rules) = Amount of grant-eligible contribution room which is eligible to receive a grant for each year from the year they are born or 1998 (whichever is later) to the year when they turn 18.
Is 17 or 18 the age which the child will receive the grant?
My child will turn 17 on 2011 and does that means she won’t be receiving any grant starting 2012?
I have been contributing to RESP for my child since 1995. I have not received any grant at all from 1995 – 1997 and I have used up all the contribution room each year since then. Is the grant available back in 1995 before 1998?
bbymom – good catch. The year when the child turns 17 is the last year when they can receive a grant. I’ll correct the information in the post.
If your child turns 17 in 2011 then that is the last year they can get any grants. This is based on calendar year so it doesn’t matter when their exact birthday is. She can get grants right up to the end of 2011 even if she turns 17 on Jan 1.
The “grant room” only started accumulating in 1998 so there was no grant room available prior to 1998.
I have a 13 year old child (year of birth 1996). I would like to contribute to RESP starting 2009. What is the maximum amount would I be able to contribute this year (2009) and in coming years to receive the maximum grant? Your comments will be appreciated.
DK, you can contribute $5k per year to get the maximum grant up to and including the year when he turns 17.
I have 3 young children in 3 different family RESP accounts and I find myself already losing track of things. In order to determine how much I can contribute in total to take full advantage of the grant do I have to determine the contributions made so far and subtract this from my limit myself or can this info be provided by the government or financial institution?
I have opened RESP for my three children ( I have five in total ) with TD bank . Now I am thinking I make a mistake . I want to switch them to TD water House so that I can invest them in equities. Is it possible now? I am thinking OK. If some one advise me, I will be thankful.
I as grandfather subscriber am contributing to a Self Directed RESP for my 2 grandchildren. If I die before any of the funds are used by the grands does any part of the RESP become part of my estate?
Does my Executor become charged with making decisions re use of the RESP by the grandchildren, or does that fall to the parents? How does one designate responsibility for the Self Directed RESP after the subscriber’s death?
Great question Harvey. I believe the resp account will be part of your estate and the ownership will be determined by your will. I’ve linked to an article which suggests that you specify in your will who will take over the account.
If you don’t do this then whoever inherits your estate will also inherit the account and they can do whatever they want with it (ie keep the money for themselves).
See this article for some good details:
http://rulelaw.blogspot.com/2008/01/estate-planning-and-registered.html
Hi. I want to open an RESP for my 2 children. I’m in the high-income bracket for calendar year 2008 but I will be in the low-income bracket for calendar year 2009 since I went for schooling. If I will open RESP before I will file my tax this Feb.2010, will govt still rely on CY 2008 (high-income) and not CY2009 (low-income) and I will not receive Canada Learning Bond and 40% grant? Should you advice that I open my RESP on June 2010 once I receive status update from the child benefit?
Dennies – I’m not sure of that timing. Starting the resp in June or later makes sense.
You should call the hrsdc.
Separated father, with two kids, 13 and 17. While married their mother and I were making contibutions to one RESP, which we do not contribute to now.
After separation we have two separate RESP’s (one contibuted to by the mother, one by the father. Is there a problem getting half the grant in one account and half the grant on another account? The bank seems to think so.
Thanks, VERY informative website
A
Andy – sorry about the separation.
The bank is right – you definitely can’t split the grants.
But why would you want to? If only one of you is making the contributions, then just split those contributions between the two RESP accounts.
Hi Mike, thanks for the info…I should have been more clear – actually we are both currently contributing, each to a separate RESP.
The intention is for each RESP to have the same amount of conributions and grants made to it, which will then be drawn out simultaneously.
Is there any way for each account to recieve a portion of the grant? For example:
Can we alternate years for receiving the grant (i.e one year I max out and get the grant in ‘my’ RESP, and she puts nothing in ‘hers’, and the next year we reverse)?
OR
Each year we each put in half the the max amount to get the grant.
OR
any other way that you can think of.
Thanks for the help
A
Andy, I’m not too clear what you mean by a “portion of the grant”.
Are you talking about splitting the amount of available grant for each year between accounts? Ie you contribute $1250 in one account and your ex contributes $1250 in the other account so both accounts each get a grant of $250?
If that is the case then yes, you can do whatever you like. You can have as many RESP accounts as you want and you can get grants in all of them based on the contributions you make in the same year.
Let me know if that doesn’t answer your question.
Mike
Hi Mike:
That’s exactly what we would like to do.
Is the other alternative (alternating yearly) allowed as well?
Thanks again
A
Andy, absolutely – there is no obligation to contribute every year. You can contribute for a few years, take a few years off, alternate years – whatever you like.
You probably know this but the contribution room carries over so you can do partial contributions in a year without any problems.
Thanks for the info Mike, this is a great resource!
If you need to find out how much you have contributed to an individual or family RESP plan, CESG grants received, available etc. you can call 1-888-276-3624. You will need your children’s SIN & DoB.
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