Canada Education Savings Grant (CESG)

The Canadian government helps you save for your child's education with a Canada Education Savings Grant (CESG). The grant is paid directly into a Registered Education Savings Plan (RESP), and is worth at least 20% of the annual contribution, up to a maximum of $500 per year per beneficiary (or up to a maximum of $600 depending on the net income of the child's family) until the year of the beneficiary's 17th birthday.

Every child up to and including age 17 is eligible to receive the grant, provided:

• the child is a Canadian resident; 
• the child has a valid social insurance number (SIN); 
• the child is named as a beneficiary of an RESP; and 
• money has been put into the RESP.

The amount of the grant is based on your family income. The amount can change over time as your family income changes.

No matter what your net family income is, the grant provides at least 20 cents for every dollar on the first $2,500 of annual RESP savings made on behalf of a child.

Depending on your family income, your child could receive additional grant on RESP savings that you make after 2004 on behalf of a child:

• If your net family income is below $37,885*, the grant will be 40 cents for every dollar on the first $500 you save in your child's RESP each year. 
• If your net family income is between $37,885* and $75,769*, the grant will be 30 cents for every dollar on the first $500 you save in your child's RESP each year.

Your net family income is reported on your Canada Child Tax Benefit statement (commonly known as "baby bonus" or "family allowance") that you receive from Canada Revenue Agency each July.

*This amount is updated each year based on the rate of inflation.

FAQ on CESG

What is Human Resources Development Canada (HRDC)?

HRDC is the branch of the Federal Government of Canada that is responsible for monitoring and paying the CESG.

Is the grant included in the calculation of $50,000 lifetime contribution to an RESP?

No. The limits exclude the grant, as well as distributions and income earned on the investment.

When is CESG money paid out?

Your contribution data is forwarded electronically by the administrator of your RESP to HRDC. The administrator will receive a lump sum payment from HRDC, which will be applied to purchase additional units in your RESP account.

Can the CESG amount be carried forward?

Yes. If you contribute less than $2,500 in any given year, you may apply for the unclaimed CESG in the following years up to a maximum of $1000 per year and a lifetime total of $7,200. For example, if you set up a plan in 2007 and contribute $5,000, you are eligible for a $500 grant for 2007 and a $500 grant for 2006.

How is the money taxed?

This is the great thing: income accumulates in the plan tax-free! The CESG and the accumulated earnings, when paid out to the beneficiary for educational purposes, are taxed as income in the hands of the beneficiary. The return of the contributions to the subscriber is not taxable.

What if I have more than one RESP, which account will receive the CESG?

Where multiple applications for the CESG are made in the same quarter, the CESG is deposited to the RESP to which the first contribution was made in the respective quarter. If contributions relating to the same beneficiaries are made on the same date, HRDC will automatically split the grant money proportionally.

Does CESG contribution room accumulate for children under age 18 even if a RESP doesn't yet exist?

Grant room accumulates every year from December 31, 1997, until the year of their 17th birthday, whether or not they have an RESP. This grant room can be carried forward to future years' RESP contributions.

What is the maximum age a child can be to qualify for the CESG?

HRDC will only pay grants to RESPs of beneficiaries up to the year of their 17th birthday. For beneficiaries aged 16 and 17, the grant will only be paid if:

1. there have been contributions to the RESP of at least $100 per year in any 4 years prior to the year in which they turned 16, or 
2. previous contributions totaled at least $2,000 before the beneficiary turned 16.