Are RESP Contributions Tax Deductible? 2025 Canadian Guide
RESP contributions are not tax-deductible in Canada. This 2025 guide for Canadian parents and advisors explains RESP tax rules, how RESPs save you taxes (grants, tax-free growth), withdrawal taxation, RESP vs RRSP vs TFSA comparisons, common mistakes, and new RESP updates – plus FAQs on RESP taxes.
TL;DR: No – RESP Contributions Are Not Tax-Deductible
No – RESP contributions are not tax-deductible in Canada. You cannot claim RESP deposits on your income tax return. However, RESPs still offer valuable tax benefits. Your investments grow tax-free in the plan, the government adds grants (CESG/CLB), and withdrawals of growth (Educational Assistance Payments) are taxed in your child's hands – often resulting in little to no tax if they have low income.
What is an RESP?
A Registered Education Savings Plan (RESP) is a special savings account for a child's post-secondary education. You (the "subscriber") contribute money toward a beneficiary (your child, or another named student). Key features of an RESP include:
- Tax-sheltered growth: Investments inside the RESP grow tax-free until withdrawn. You won't pay tax yearly on interest, dividends, or capital gains earned in the account.
- Government grants: The Canadian government helps boost RESP savings through programs like the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB). For example, the CESG adds 20% to your contributions (up to $500 per year, $7,200 lifetime per child).
- Lifelong plan: An RESP can stay open for up to 35 years, allowing flexibility if the child delays or changes education plans. Family members (e.g. siblings) can share a Family RESP, helping use the funds even if one child doesn't pursue college.
Importantly, an RESP is designed specifically for education funding. It's different from retirement accounts like RRSPs or general savings like TFSAs – we'll compare those later. First, let's address how RESP contributions and taxes work.
Why RESP Contributions Aren't Tax-Deductible
Many Canadians ask "are RESP contributions tax deductible?" It's a crucial question in understanding RESP and taxes. The answer: No, you cannot deduct RESP contributions from your taxable income. Unlike RRSPs (which reduce your income for tax purposes when you contribute), RESP deposits are made with after-tax dollars and provide no immediate tax break or credit.
Why did the government set it up this way? An RESP's benefit is "delayed" – you get the tax savings and grants when the money is used for education, rather than upfront. The Canada Revenue Agency (CRA) explicitly states that RESP contributions cannot be deducted on your income tax return. There is also no RESP tax credit federally; in other words, you can't claim RESP contributions on taxes as a deduction or credit when you file.
However, this doesn't mean RESPs lack tax advantages! On the contrary, RESPs offer tax-deferral and income splitting benefits that can outweigh the immediate deduction you'd get from something like an RRSP. Let's see how RESPs help you save on tax in the long run.
(Source: Canada Revenue Agency – "RESP contributions cannot be deducted from your income"; CRA RESP FAQ)
How RESPs Actually Save Taxes
If you don't get a tax deduction for contributions, how do RESPs provide tax benefits? There are three major RESP tax advantages:
RESP Tax Benefits
In summary, while there's no RESP tax deduction upfront, RESPs provide tax relief on the back end. You get tax-deferred growth and can shift taxable education income to your child (who typically is in a low tax bracket). Plus, the government's CESG and CLB inject "tax-free" money that you'd never get with a normal investment account. These RESP tax benefits can add up to thousands of dollars saved.
Sample Numbers
Suppose you contribute $2,500 annually to an RESP for 10 years (total $25,000). Each year it earns the $500 CESG (total $5,000). Invested conservatively, the RESP grows to approximately $40,000 by year 10 (assuming ~5% growth). This $40k breaks down as:
- $25,000 contributions (not taxed on withdrawal)
- $5,000 in CESG grants
- ~$10,000 investment growth
If the student withdraws that $40,000 over a 4-year university program, about $15,000 (grants+growth) would be taxable as EAP. But spread over 4 years (~$3.75k/year), a student with basic tax credits would pay virtually $0 in income tax on it. All the investment earnings are realized tax-free for education. Meanwhile, without an RESP, that $10k growth could have been taxed in your hands each year or upon sale.
Withdrawal Taxation: EAP vs PSE Withdrawals and T4A Slips
When it's time to use the RESP for schooling, understanding RESP taxation on withdrawals is important. Here's how it works:
Tax-Free Contribution Withdrawals
Any money you contributed (the principal) can be withdrawn tax-free. If the beneficiary is in post-secondary, you can withdraw contributions as a Post-Secondary Education (PSE) withdrawal for them, which comes out tax-free. If not, you (the subscriber) can get your contributions back – either way, that portion was already taxed when you earned it, so the CRA does not tax it again.
Educational Assistance Payments (EAPs)
These are withdrawals of the earnings and grants. EAPs are taxable as income for the student (beneficiary) and will be reported on a T4A slip in the student's name each year. The student must be enrolled in an eligible program to receive EAPs. Because students often have low income, most or all of the EAP is tax-free after credits.
EAP Withdrawal Limits
There is a cap on EAP withdrawals in the early stages of schooling. As of Budget 2023, the limits are:
After that period, there's no fixed dollar limit – you can withdraw EAPs as needed for education costs (subject to the overall RESP balance and what the institution allows).
If The Child Doesn't Pursue Post-Secondary
What happens to an RESP if the beneficiary doesn't go to college or otherwise qualify? You have options, but they have tax implications:
- You can name a replacement beneficiary (a sibling, for example) and use the funds for their education, if conditions allow.
- If ultimately unused for education, you can collapse the RESP. Your contributions come back tax-free to you. Any investment earnings become an Accumulated Income Payment (AIP) – taxable in your hands at your regular income tax rate plus an additional 20% penalty tax (12% in Quebec).
- To soften this blow: you may be able to roll up to $50,000 of RESP earnings into your RRSP (if you have RRSP room) to avoid the penalty.
- Another alternative is transferring the funds to an RDSP (disability savings plan) for the beneficiary, if they become eligible (specific conditions apply).
Bottom line: RESP withdrawals are taxed favorably. The contributor's original money is never taxed upon withdrawal, and the growth and grants are taxed to the student, often at a zero or very low tax rate. This is by design – an RESP effectively shifts some income from a higher-earning parent to a lower-earning student, with the added boost of government grants. Just be aware of the rules if the RESP isn't used for education, to avoid penalties and make use of transfer options.
RESP vs RRSP vs TFSA: A 2025 Comparison
How does an RESP compare with other registered accounts like an RRSP (Registered Retirement Savings Plan) or a TFSA (Tax-Free Savings Account)? Each has different tax treatments and purposes. Here's a comparison:
2025 Account Comparison
| Feature | RESP (Education) | RRSP (Retirement) | TFSA (Any purpose) |
|---|---|---|---|
| Primary purpose | Pay for beneficiary's post-secondary education | Retirement savings (can also be withdrawn for first home or education via special programs) | Flexible savings for any goal (no restriction on use) |
| Contributions deductible? | No – RESP contributions are not tax-deductible. You invest after-tax income (no tax refund). | Yes – RRSP contributions reduce your taxable income (you get a tax deduction up to your RRSP limit). This often results in a tax refund. | No – TFSA contributions are not deductible (they're made with after-tax dollars). |
| Annual contribution limits | No annual dollar limit. Practical limit to get max CESG is $2,500/yr (or $5,000/yr if catching up). Lifetime limit $50,000 per beneficiary. | Yes – limit is 18% of previous year's earned income, up to annual max. For 2025, the RRSP dollar limit is $32,490. Unused room carries forward. | Yes – $7,000 per year in 2024 and 2025. Unused room accumulates since 2009. By 2025, total TFSA room available (for someone eligible since 2009) is up to ~$102,000. |
| Tax on investment growth | Tax-deferred – no tax on investment earnings while in the plan. | Tax-deferred – earnings not taxed while inside RRSP. | Tax-free – earnings are never taxed, even upon withdrawal. |
| Withdrawals (purpose) | Education: Contributions can be withdrawn tax-free; earnings/grants taxed to student (usually low/no tax). If not for education, earnings withdrawn by subscriber are taxed + 20% penalty. | Any purpose, but all withdrawals are fully taxable as income to the account holder in the year of withdrawal. (Exceptions: tax-free rollovers to RRIF or annuity at retirement; special programs like Home Buyers' Plan or Lifelong Learning Plan allow temporary tax-free withdrawals if repaid). | Any purpose, any time. All TFSA withdrawals are completely tax-free, including all investment gains – no restrictions. |
| Government incentives | Yes – eligible for CESG (20% grant on contributions) up to $7.2k, and CLB (up to $2k for low-income). Some provinces add grants (e.g. Quebec's 10-20% credit, max $3.6k; BC's one-time $1.2k). | No direct grants or "free money." The incentive is the immediate tax deduction (and tax-sheltered growth). Contributions may also qualify for a federal savers' credit for low incomes. | No grants or credits; the benefit is completely tax-free growth & withdrawals. |
Which to use for education savings? Generally, RESPs are best for saving for a child's education because of the CESG grant (essentially a 20% return on contributions) and the advantageous tax structure for education funding. RRSPs and TFSAs serve different primary purposes but could supplement education savings in some cases:
TFSA vs RESP
A TFSA is more flexible and might be preferable if you're not sure the child will pursue post-secondary (no penalties if the money isn't used for school). However, TFSAs lack grants and any withdrawals (while tax-free) don't get the benefit of shifting to the student's income. If education is a definite goal, the RESP's grants and tax-deferred growth give it an edge.
RRSP vs RESP
An RRSP is meant for retirement, but some parents consider using RRSP savings for education. You can use the Lifelong Learning Plan (LLP) to withdraw from your RRSP for your own or your spouse's education (up to $10,000/year, $20,000 total, repayable over 10 years). However, you cannot use your RRSP for your child's education without tax consequences – any withdrawals not under the LLP are taxed to you.
Common Myths & Mistakes About RESPs
Common RESP Myths
Common RESP Mistakes
- Contributing too much, too fast. Don't exceed the $50k lifetime limit – any excess contribution is penalized at 1% per month until withdrawn. Also, contributing far above $2,500 in one year won't increase that year's CESG beyond $500. If you have a lump sum, it's usually better to spread it out ($2,500 per year, or $5,000 if catching up) to maximize grants.
- Starting late and missing grant room. If you wait too long to start an RESP, you could miss out on matching grants. You can carry forward unused CESG room (up to one extra $500 grant per year), but after the child turns 17, no new CESG can be paid.
- Not planning for contingencies. If you have a family plan and one child doesn't use all the funds, you can apply them to siblings (within limits). But if it's an individual plan and the child doesn't pursue education, parents sometimes scramble. Consider a family RESP if you have multiple kids, and be aware of options to transfer or use funds in other ways.
- Forgetting about the RESP when applying for student aid. RESP savings and withdrawals generally do not reduce eligibility for student loans/grants heavily, because contributions withdrawn aren't income and even EAPs are typically counted as student income. However, it's good to use RESP funds wisely alongside student aid.
Optimizing RESP Contributions and Strategy
Maximize the CESG Each Year
The basic strategy is to contribute at least $2,500 per child per year to get the full $500 CESG annually. Consistency pays off – contributing this amount every year from your child's birth could yield the full $7,200 grant by about age 14–15. If you start late or skip a year, you can catch up one year at a time (e.g. contribute $5,000 in one year to get $1,000 of CESG – $500 for the current year and $500 for one missed year).
Contribute Early
The sooner you put money in, the longer it has to grow tax-free. Even if you can't hit $2,500 every year, start with what you can. Family gifts (like birthday/holiday money from relatives) can be funneled into the RESP to start earning and attract the CESG. An early start also ensures you meet the age-15 rule for receiving CESG at 16–17.
Use a Family RESP for Multiple Kids
If you have more than one child, a family plan can be efficient. All beneficiaries must be related to you (the subscriber) by blood or adoption. You can contribute in one account and later allocate the pooled funds to whichever child needs it. This way, if one child doesn't pursue post-secondary or doesn't use all the money, the remaining funds can be used for a sibling's education.
Plan Withdrawals to Minimize Tax
When your child is in post-secondary, plan out the RESP withdrawals smartly. Typically, you would use up EAPs (taxable portion) during the student years, since they're in a low bracket. The subscriber's contributions can actually be withdrawn at any time tax-free. Withdraw the grant/earning portion while the child is a student to make use of their low-tax status.
2025 RESP Rules, Changes & Deadlines
Key 2025 RESP Updates
Recent Budget Changes
Plan Ahead For Your Child's Education
Saving for your child's education is a meaningful investment in their future. While RESP contributions aren't tax-deductible, we've seen that RESPs offer powerful tax and growth benefits that can make higher education much more affordable. By contributing regularly, capturing all available grants, and understanding RESP tax rules, you can potentially accumulate a significant education fund with minimal tax impact.
If you're unsure about the best RESP strategy for your situation, or how to balance RESP saving with other priorities like RRSP or TFSA contributions, it may help to speak with a financial advisor. A professional can provide personalized guidance, help you choose suitable investments for your RESP, and ensure you're on track to meet your education savings goals.
Schedule a ConsultationRESP FAQs
Is RESP contribution tax deductible in Canada?
No. RESP contributions are not tax-deductible in Canada. When you contribute to an RESP, you do so with after-tax dollars. Unlike an RRSP, you cannot deduct RESP deposits on your income tax return or receive any tax credit for contributing. The tax advantages of an RESP come later – through tax-free growth and taxed-as-student withdrawals – rather than an upfront deduction.
Can you claim RESP contributions on your taxes?
No, you cannot claim RESP contributions on your annual tax return. The CRA does not provide any deduction or tax credit for RESP deposits. Some people mistakenly try to enter RESP contributions on their tax forms, but there is no such line. The benefit of contributing to an RESP is not a tax break today, but rather the government grants (CESG/CLB) and the tax-deferred investment growth for future education use.
What are the tax benefits of an RESP?
RESP tax benefits include tax-sheltered growth and tax-efficient withdrawals. Investments in the RESP grow without being taxed annually. This allows compound interest to work faster. When funds are withdrawn for education, the earnings and grants are taxable to the student beneficiary (via EAP), who often pays little to no tax due to low income and credits. Thus, those funds can be used almost tax-free for education. Additionally, the CESG and CLB are major financial benefits – essentially free money that augment your contributions.
Are RESP withdrawals considered taxable income?
Part of the RESP withdrawal is taxable income, but part is not. Contribution withdrawals are not taxable – you already paid tax on that money when you earned it. EAP withdrawals (grants + earnings) are taxable as income to the student. These funds will be reported on the student's tax return (T4A slip) for the year withdrawn. In practice, most students have low enough income that these EAP amounts are either completely tax-free or taxed at a very low rate.
Is there any RESP tax credit I can get?
There is no federal tax credit for RESP contributions. The benefit from the government comes as the Canada Education Savings Grant (CESG), which is a grant deposited into your RESP, not a credit on your tax return. However, if you live in Quebec, there is a program called the Quebec Education Savings Incentive (QESI), which is often described as a "tax credit." QESI is a refundable tax credit that the Quebec government contributes directly into the RESP (up to 10% of annual contributions, 20% for low-income families, with a max of $3,600 per child lifetime).
RRSP vs TFSA – which is better for education savings vs an RESP?
An RESP is specifically designed for education savings (with grants and education-centric tax benefits), while RRSPs and TFSAs serve other primary purposes. If you are sure the money is for a child's education, an RESP is usually better because of the 20% CESG grant. An RRSP is meant for retirement and using it for your child's education would result in taxable withdrawals. A TFSA is more flexible with no penalties if not used for education, but lacks grants and income shifting benefits. In general, contribute to the RESP first to get all grants, consider a TFSA for additional or backup savings.
Disclaimer: The information in this guide is for general educational purposes and reflects 2025 rules. Tax laws and programs can change, and individual situations vary. Always double-check with official CRA resources or a financial professional before making decisions.