Canada Education Savings Grant (CESG)
Human Resources and Skills Development Canada (HRSDC) provides an incentive for parents, family and friends to save for a child's post-secondary education by paying a grant based on the amount contributed to an RESP for the child. The CESG money will be deposited directly into the child's RESP.
Who qualifies for the basic CESG
No matter what your family income is, HRSDC pays a basic CESG of 20% of annual contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.
Who qualifies for the additional CESG
HRSDC will also pay an additional CESG amount for each qualifying beneficiary. The additional amount is based on your net family income and can change over time as your net family income changes.
For 2012, the additional CESG rate on the first $500 contributed to an RESP for a beneficiary who is a child under 18 years of age is:
- 40% (extra 20% on the first $500), if the child's family has qualifying net income for the year of $42,706 or less; and
- 30% (extra 10% on the first $500), if the child's family has qualifying net income for the year that is more than $42,707 but is less than $85,414.
The following chart gives you a brief overview of how the CESG is calculated depending on your family net income:
|Family net income for 2012||Family net income up to $42,706||Family net income between $42,707 and $85,414||Family net income of more than $85,414|
|CESG on the first $500 of annual RESP contribution||40% = $200||30% = $150||20% = $100|
|CESG on $501 to $2,500 of annual RESP contribution||20% = $400||20% = $400||20% = $400|
|Maximum yearly CESG depending on income and contributions||$600||$550||$500|
|Lifetime maximum CESG for which you may qualify||$7,200||$7,200||$7,200|
Every child under age 18 who is a Canadian resident will accumulate $400 (for 1998 to 2006) and $500 (from 2007 and subsequent) of CESG contribution room. Unused CESG contribution room is carried forward and used when RESP contributions are made in future years provided that the specific contribution requirements for beneficiaries who attain 16 or 17 years of age are met.
The qualifying net income of the child's family for a year will generally be the same as the income used to determine eligibility for the Canada Child Tax Benefit (CCTB).
Beneficiaries qualify for a grant on the contributions made on their behalf up to the end of the calendar year in which they turn 17 years of age.
Contribution requirements for beneficiaries who are 16 or 17 years old
However, since the CESG has been designed to encourage long term savings for post-secondary education, there are specific contribution requirements for beneficiaries who attain 16 or 17 years of age. RESPs for beneficiaries 16 and 17 years of age can only receive CESG if at least one of the following two conditions is met:
- a minimum of $2,000 of contributions has been made to, and not withdrawn from, RESPs in respect of the beneficiary before the year in which the beneficiary attains 16 years of age; or
- a minimum annual contributions of at least $100 has been made to, and not withdrawn from, RESPs in respect of the beneficiary in any four years before the year in which the beneficiary attains 16 years of age.
This means that you must start to save in RESPs for your child before the end of the calendar year in which the beneficiary attains 15 years of age in order to be eligible for the CESG.
The CESG and accumulated earnings will be part of the educational assistance payments paid out of the RESP to the beneficiary.
If the beneficiary does not pursue post-secondary education, the CESG is returned to the government.
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