An RESP is a trust arrangement that earns tax-free income to be used to fund the cost of a child or grandchild’s post-secondary education. Contributions to an RESP are not deductible for tax purposes and withdrawals of capital from the RESP are not taxed. The beneficiary is taxed on the accumulated income portion when withdrawn from the RESP for the purpose of funding their post-secondary education. While at school, the child or grandchild tends to have relatively low sources of other income, and as a result, the income is usually taxed at lower rates (if at all).
For RESP contributions in 2023:
A federal Government grant of 20 per cent of annual RESP contributions is available for each beneficiary under the “Canada Education Savings Grant” (“CESG”). The maximum annual RESP contribution that qualifies for the federal Government grant is $2,500.
If the beneficiary of the RESP decides not to attend post-secondary education, and you decide to withdraw the funds via accumulated income payments, you will be taxed on the accumulated income in the plan at your marginal tax rates at the time of withdrawal, plus an additional 20 per cent. Further, the CESG must be returned to the government. However, the capital contributed to the plan may be withdrawn tax-free.
The CESG can be shared with a sibling who is attending post-secondary education if they have grant room in their RESP; otherwise, the grant must be returned to the government.
You also have other options including, leaving the funds in the RESP for up to 36 years until your child decides to attend, replacing the beneficiary, or transferring the money to an RRSP or RDSP. To determine which option is most suitable in your situation, talk to your Crowe Soberman advisor.
The Registered Disability Savings Plan ("RDSP") is a savings plan that is intended to help parents and others save for the long-term financial security of a person who is eligible for the Disability Tax Credit.
For 2016 and subsequent tax years, the Government implemented a non-refundable Home Accessibility Tax Credit.
The tax credit is available for eligible expenses incurred in making a home more accessible to individuals aged 65 or older or to individuals who are disabled or infirm.
Either the individual who incurred the expenses or the individual for whom the expenses are made can claim the tax credit. The individual who incurred the expenses can only claim the tax credit in respect of expenses incurred for his or her spouse or common-law partner, or for disabled or infirm dependants.
For 2022 and subsequent tax years, you can claim up to $20,000 in eligible expenses under the Home Accessibility Tax Credit, resulting in a non-refundable tax credit worth up to $3,000. Expenses eligible for the claim must be permanent and non-routine renovations to the home. The alterations must allow the individual for whom the expenses were incurred to be mobile within the home and/or reduce the risk of harm to the individual within the home.
In addition to the CCB (discussed above), you may be entitled to the Child Disability Benefit (“CDB”) if your child is eligible for the disability tax credit. If you are already getting the CCB for your child who is eligible for the disability tax credit, you will receive the CDB automatically. Similar to the CCB, the CDB is a tax-free monthly payment. The program provides parents with monthly benefits of up to $248.75 ($2,985 annually) for each child who is eligible for the disability tax credit. The CDB is gradually clawed back for families making over $71,060.
Ontario offers support to eligible residents participating in fertility treatments (all residents of Ontario with valid OHIP). The following treatments and eligibility requirements include:
Consider the following acceptable ways of shifting income to family members whose taxable income is below the lowest tax bracket, approximately $46,226 in 2022, and $49,231 in 2023. This will allow them to take advantage of certain non-transferable credits as well as lower tax rates.
Tax Tips 2023