How is an RESP taxed if a child decides not to continue education after high school?
• Again, your money grows tax-free while it is in your RESP. • You don’t get a tax deduction for the money you put into an RESP. • The money that your investment earns while it is in the RESP won’t be taxed until you close your RESP because your child has decided not to pursue education after high school. • The money that you have put into the RESP is returned to you, tax-free. • The Canada Education Savings Grant can be shared with a brother or sister if they have grant room available—otherwise, the grant will be returned to the government. • When you close your RESP, you will have to pay tax on the earnings in the RESP. (Although there will be earnings on the Canada Education Savings Grant, the grant will have to be returned to the Government of Canada.) You may be able to reduce the taxes you have to pay by transferring your Accumulated Income Payment to a Registered Retirement Savings Plan. For more information, see the Accumulated Income Payments section of the Canada Revenue Agen
• 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. • The money that you have put into the RESP is returned to you. • The Canada Education Savings Grant can be shared with a brother or sister if they have grant room available—otherwise, the grant must be returned to the Government of Canada. • When you close your RESP, you will have to pay tax on the earnings in the RESP. (Although there will be earnings on the Canada Education Savings Grant, the grant must be returned to the Government of Canada.) You may be able to reduce the taxes you have to pay by transferring your accumulated income to either your or your spouse’s Registered Retirement Savings Plan. For more information, see the Accumulated Income Payments section of the Canada Revenue Agency’s Web site. • T
Related Questions
- How long will it take us to shift into an inclusive education system? My child will be completing high school in five years – will he experience the shift while he’s a student?
- How is an RESP taxed if a child decides not to continue education after high school?
- How is an RESP taxed (assuming the child continues education after high school)?
