Thanks to reader Nicolas for providing a gentle nudge to write a post on a private members’ bill that was passed last night that would allow Canadians to deduct contributions to RESP plans (Registered Education Savings Plans). The bill (which is not final), proposes that contributions up to $5,000 per year (and up to a lifetime maximum of $50,000) be deductible from the contributor’s income.
I have not found anything that indicates whether the CESG (Canadian Education Savings Grant) would still be awarded but my guess is that since there is stiff opposition to this bill (from the Conservative Party), the grant would be eliminated. Fingers crossed for both though! :)
For an Ontarian in the highest tax bracket, an annual $5,000 contribution to an RESP would yield $2,320.50 in tax savings. Also, this program could be of benefit to older Canadians as it would provide an incentive to go back to school. Currently, the CESG is not available for adult Canadians themselves (only children), but you can actually set up an RESP for yourself now if you want to take advantage of the tax sheltering. If RESP contributions become tax deductible, then this opens up some new possible planning strategies and renders the RRSP Lifelong Learning Plan all but obsolete.
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RRSPs: The Definitive Book on Registered Retirement Savings Plans