Tax on RESP excess contributions
An excess contribution occurs at the end of a month when the total of all contributions made by all subscribers to all RESPs for a beneficiary is more than the lifetime limit for that beneficiary. We do not include payments made to an RESP under the Canada Education Savings Program (CESP) or any Provincial Education Savings Programs when determining whether a beneficiary has an excess contribution.
Each subscriber for that beneficiary is liable to pay a 1% per-month tax on his or her share of the excess contribution that is not withdrawn by the end of the month. The tax is payable within 90 days after the end of the year in which there is an excess contribution. An excess contribution exists until it is withdrawn.
You have to inform us of your share of the excess contribution to all RESPs for a beneficiary. To calculate the amount of tax you have to pay on your share of the excess contribution for a year, fill out Form T1E-OVP, Individual Tax Return for RESP Excess Contribution.
Waiver of liability
We may waive or cancel all or part of the taxes if we determine it is fair to do so after reviewing all factors, including whether the tax arose because of a reasonable error and whether the tax also gave rise to more than one tax under the Income Tax Act. To consider your request, we need a letter that explains:
- why the tax liability arose
- why this is a reasonable error
- why it would be fair to cancel or waive all or part of the tax.
Send your letter to following address:
Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5
There are limits on the amounts that can be contributed to all RESPs for a beneficiary.
For each beneficiary, the annual limit is:
- for 1996 is $2,000
- for 1997 to 2006 is $4,000
- for 2007 and subsequent years, there is no limit
For each beneficiary, the lifetime limit is:
- for 1996 to 2006 is $42,000
- for 2007 and subsequent years is $50,000
You can reduce the amount subject to tax by withdrawing the excess contributions. However, in determining whether the lifetime limit has been exceeded, we include the withdrawn amounts as contributions for the beneficiary even though they have been withdrawn.
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