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All about CESG
Canada Education Savings Grant
Employment and Social Development Canada (ESDC) is a great initiative that encourages parents, friends and family members to save for their child’s post-secondary education by providing remunerations and incentives in accordance with the contributions to an RESP. The Canada education savings grant (CESG) is a real financial support to the child’s RESP.
Requirements to meet the basic CESG
Regardless of your family’s income, the amount that ESDC pays is based on the Canada Education Savings Grant. This amount is equal to 20% of the 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 the grant for the previous year is not used). Plus, there is a lifetime limit in the amount of $7,200.
Qualifications for becoming the additional CESG
ESDC is ready to contribute additionally for all qualifying beneficiaries. The additional contribution is flexible and can change over time. However, originally it depends on the adjusted income.
The additional CESG rate on the first $500 contributed to an RESP for beneficiaries under 18 years old are as follows (the information is valid for 2017):
- 40% (extra 20% on the first $500), if an annual net income of the beneficiary’s family is $45,916 or less.
- 30% (extra 10% on the first $500), if an annual net income of the beneficiary’s family is more than $45,916 but less than $91,831.
Canada Education Savings Grant Summary Chart
The following chart provides you a better understanding of how the CESG is calculated based on the adjusted income:
|Adjusted income for 2017||$45,916 or less||more than $45,916 but less than $91,831||more than $91,831|
|CESG on the first $500 of annual RESP grant||40% = $200||30% = $150||20% = $100|
|CESG on $501 to $2,500 of annual RESP grant||20% = $400||20% = $400||20% = $400|
|Maximum yearly CESG based on income and grants||$600||$550||$500|
|Lifetime maximum CESG for which it is possible to qualify||$7,200||$7,200||$7,200|
Every Canadian resident, who is under 18 years old can collect $400 (for 1998 to 2006) and $500 (from 2007 and subsequent) of CESG contribution room.
Any CESG contribution that is not utilized is carried forward and used when RESP contributions are made in the subsequent years on the ground that the beneficiaries are between the age of 16 and 17 years old.
Beneficiaries have a chance to win a grant on the contributions made on their behalf by the end of the year when they turn 17.
Requirements for Beneficiaries Between 16 and 17 Years Old
The CESG is designed to encourage long-term servings to sponsor the secondary education of children. There are certain conditions for the beneficiaries who have attained the age of 16 or 17 years old. They can receive CESG if they meet at least one of the conditions below:
- at least $2000 has to be deposited to the RESP account of the child before they turned 15;
- at least $100 should be transferred to the RESP for 4 years before the end of the calendar before the child turned 5. This amount cannot be withdrawn from the account.
Hence, your savings for the child’s post-secondary education should start before the child turns 15.
The CESG and accumulated earnings are paid to the beneficiary as an additional support of his/her education plan.
In case, when the beneficiary chooses not to continue with his/her post-secondary education, the CESG will be refunded to the government.