How to Check RESP Contribution Room

Saving for your child’s education through a Registered Education Savings Plan (RESP) is one of the best investments you can make toward their future. But, similar to other savings accounts, there are rules on how much money you can invest. That’s where your “contribution room” comes in.

You can think of your RESP contribution room as the breathing space you have before hitting the lifetime contribution limit of $50,000. By checking this contribution room regularly, you can maximize government grants like the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB), avoid over-contribution penalties, and plan your deposits more strategically.

What “Contribution Room” Means for RESPs

Unlike other registered savings accounts, such as RRSPs or TFSAs, Registered Education Savings Plans (RESPs) don’t have an annual contribution limit. Instead, they have what is known as a lifetime contribution limit of $50,000 per beneficiary across all open RESP accounts.

Here’s a closer look at what counts toward this lifetime contribution limit:

• Counts toward limit: Every dollar you contribute to the account, whether it be from you, grandparents, or others.
• Doesn’t count toward limit: Grants from the government of Canada, like CESG, CLB, or provincial programs, and investment growth inside the RESP.

So, why does this matter? Going over the contribution limit will trigger a 1% tax penalty per month on the excess contribution amount until it’s withdrawn from the account. That’s why regularly checking your RESP room is important to avoid these tax implications.

Gather Your Totals Across All Providers

The first step in checking your RESP contribution room is getting a look at the bigger picture. Many Canadian families have more than one RESP account open, whether it be in the form of an individual RESP, a family RESP, or an account with different providers.

Here’s what you can do to gather the right information you need:

1. Gather statements from each RESP provider: Make sure you have the most updated balances and contribution histories for each RESP account.
2. Only add up your total contributions: Exclude grant money and investment earnings, as they don’t count toward the lifetime limit.
3. Look for transfers: If you’ve moved funds between different providers, make sure you’re not double-counting the same contribution.

Pro tip: Keep a spreadsheet or running total each time you make a deposit or transfer from one account to another. This will help you stay organized long term.

Calculate Your Remaining Room (With Examples)

Once you have your total contributions, the math is pretty straightforward:

Remaining room calculation: $50,000 – total contributions = contribution room.

Let’s look at some quick examples of this calculation below:

Example 1: Single RESP plan

Let’s say, since the day you opened an RESP for your child to pursue post-secondary education, you’ve contributed $22,500.

If we minus your RESP contributions from the $50,000 lifetime limit, you’d have $27,500 remaining.

Example 2: Multiple RESP plans

Now, let’s say you’ve contributed $10,000 into one family RESP, and your child’s grandparents have contributed $5,000 into a separate account for that same child.

If we add both contributions, we get a total of $15,000l. We then subtract this from $50,000 to get a remaining contribution room of $35,000.

Remember, the lifetime limit applies per beneficiary, not per account. So even if you have multiple RESPs open, they all have the same limit. Additionally, for family plans, the contribution room is still tracked per child, not pooled. Therefore, if you have multiple beneficiaries, they each have their own $50,000 maximum.

Track CESG-Efficient Deposits

While the contribution limit for RESPs is $50,000, the Canada Education Savings Grant (CESG) works differently. The Government of Canada will match 20% of your contributions up to a maximum of $500 per child, per year, with a total lifetime limit of $7,200.

Here’s how to maximize this grant:

• Aim to contribute $2,5000 a year to receive the full $7,200 CESG lifetime limit.
• If you miss a year, you can catch up by contributing up to $5,000 in one year to receive up to $1,000 in CESG.
• To stay on track, set up monthly deposits of $210.

How to Avoid Over-Contributions (and the 1% Tax)

Overcontribution rarely occurs, but it can still happen, especially if multiple family members are contributing to your child’s RESP without coordinating with one another. The penalty for overcontributions is a 1% tax per month on the excess contribution amount until the excess has been removed.

To avoid this tax penalty:

• Always double-check your contribution room before making large deposits into the account. Confirm totals across all RESPs if multiple are open.
• Withdraw the excess contribution amount as quickly as possible if you discover you’ve made a mistake. The sooner you do so, the less tax you’ll need to pay.
• Coordinate with relatives. If grandparents or other family members decide to contribute, set up a shared tracker or group chat to avoid overcontributing.

Special Situations That Can Skew Your Room

RESP room can get a bit tricky every once in a while. Here’s a closer look at some special scenarios that you’ll want to keep in mind:

• The beneficiary changes in your family RESP plan: If you transfer funds from one child to another, the room will follow that child, not the account. Always recheck the total of the new beneficiary before moving funds.
• Large lump-sum gifts: If your child’s grandparents contribute $10,000 in one lump sum, you can do so, but the government will still only give you up to $500 in CESG for the year. Depositing more than $2,500 into the account may allow you to collect back grant, if eligible. This could increase your grant money by up to $1,000. To maximize CESG, plan your contributions strategically.
• Transfer between providers: If you decide to move your RESP to another bank or investment firm, make sure you double-check that the total contributions are not recorded twice.

Quick Tools & Checklist

The easiest way you can stay on top of your contribution room is to commit to a routine check-in. Here’s what we find helps:

Tools to use:

• RESP provider statements.
• Household spreadsheet.
• An annual calendar reminder.

Your checklist:

1. Confirm your lifetime limit.
2. Verify your CESG targets and catch up if needed.
3. Plan your deposits strategically to ensure you maximize your CESG money.
4. Recheck before the end-of-the-year deadline to avoid surprises.

Contribution limits: final thoughts

Checking your contribution room doesn’t need to be complicated. By staying organized, you can stay well within the rules while optimizing every dollar of grant money available.

Ready to make the most out of your RESP? Contact an Education Savings Specialist from Embark today to double-check your contribution room and maximize your CESG benefits.