Q&A: Tax break for RESPs?
Question: I have two new grandchildren and would like to start an RESP for them. Is that a tax-free investment? Do I get to claim that in my tax return? – Raji R., Ontario
Gordon Pape answers: No. Unlike contributions to a registered retirement savings plan (RRSP), payments to a registered education savings plan (RESP) cannot be deducted from your income for tax purposes. However, these plans have other advantages. All investment income earned within the plan is tax-sheltered until withdrawn and the federal government adds an extra 20% to your contribution (up to $500 annually) under the Canada Education Savings Grant program. As well, you can withdraw all your capital tax-free (but not the earnings) at any time.
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