What kind of tax rules apply to an RESP?
While the contributions you make to your plan are not tax-deductible, the investment income generated in your savings plan – income such as interest, dividends or capital gains – is not taxed until the funds are withdrawn from the plan. When you save in an RESP, your contributions and your CESG enjoy compound growth that is tax-sheltered. When the time comes to withdraw funds from your plan, the money is paid in your child’s name to reduce taxes. Since students have generally low income levels, little or no tax is payable.
