All the Numbers

Taking money out of an RESP

From the All the Numbers wiki · Savings accounts

An RESP holds three kinds of money: what the subscriber contributed, the government grants and Canada Learning Bond payments, and the growth on all of it. Each is treated differently on the way out.

Contributions

The subscriber's contributions come back tax-free, at any time, because they were never deducted. These are not an education payment, so they do not need a student to be enrolled.[1]

Educational assistance payments

Grants, bond payments and growth leave the plan as educational assistance payments (EAPs) to a student. An EAP is included in the student's income, not the subscriber's.[1] Most students have little other income, and tuition credits and the basic personal amount often cover it; see personal tax credits.

Each withdrawal has to be split between the parts. The grant part is the withdrawal times the grant balance divided by the plan's total of income, bond and grant balances, but never more than $7,200 less the grant already paid out in EAPs to that student. The income part and the bond part follow the same proportions. A non-resident student receives none of the grant or bond part.[2]

If no one studies

Once a plan is more than nine years old, and every beneficiary is 21 or older and cannot receive EAPs, the subscriber may take the growth out as an accumulated income payment (AIP). The same is allowed in the plan's last permitted year, or once every beneficiary has died.[3] The plan has to end before March of the following year. The final year is the 35th after the one in which the plan was opened.[4]

  • An AIP is the subscriber's income, with an extra 20% tax on top of the usual rate.[5]
  • The extra tax can be avoided by moving the amount into the subscriber's RRSP, up to unused room, and up to $50,000 over the subscriber's lifetime.[6] See RRSP room.
  • The grants and bond payments are returned to the government. The trustee repays the lesser of those balances and a share of the plan's market value in proportion to them, so a plan that has lost value repays less.[7]

What the planner does

  • Contributions first. A withdrawal from an RESP on the planner is taken as an education withdrawal. Your contributions come out first and tax-free, and only the remainder is an EAP.[8] You choose the real split with the promoter each time.
  • A student the plan can tax. An EAP is taxed on the student's own return, so the student has to be a person the plan can assess. The tax engine assesses adults only, so education withdrawals are supported for a beneficiary who is 19 or older at year end.[9] An EAP for a younger student is flagged as not carried over. When the student is old enough, the planner adds them to the plan with no other income.
  • Not modelled by the planner. No accumulated income payment, no 35-year wind-up, no repayment of grants on closing the plan, and no allocation of a loss. The engine can pay an AIP, charge the 20%, apply the rollover and repay the grants when the conditions are supplied as a fact, but the planner has no event for it. A plan that reaches the limit with money still inside is not resolved for you.

See also

  • Age, spouse and caregiver credits · Some credits depend on who you are or who you support. The age amount starts at 65 and shrinks with income; the spouse amount is the basic personal amount less your partner's income. The planner applies the age amount but not the spouse or caregiver credits.
  • RESPs and the education grant · Contributions attract a 20% government grant, up to $500 a year, and $7,200 for a child's lifetime, up to a $50,000 contribution limit. Growth and grants come out taxed in the student's hands, at a rate that is usually near zero.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • The Canada Learning Bond · A government payment into a child's RESP for lower-income families, $500 for the first year and $100 for each later year, to $2,000, with no contribution needed. The planner does not claim it because it does not ask for family income.
  • The tuition credit · Eligible tuition fees earn a federal credit at the lowest tax rate. Unused credit carries forward without limit, and a student can pass part of the current year's credit to a spouse or parent. The planner does not ask for tuition, so plans do not include it.

References

  1. ↑Income Tax Act s.146.1(7) · Educational assistance payments (grants + growth) are included in the STUDENT's income, not the subscriber's; contributions come back tax-free · effective 1998-01-01
  2. ↑Canada Education Savings Regulations s.10(1)–(3) · EAP components: CLB part = A × CLB balance ÷ C; CESG part = lesser of A × grant balance ÷ C and $7,200 less CESG previously paid in EAPs to the beneficiary; income part = A × accumulated income ÷ C; C = income + (resident) CLB + (resident, under $7,200) grant; grant and CLB parts nil for a non-resident · See the source · effective 2005-07-01
  3. ↑ITA 146.1(2)(d.1)(i)–(iii), 146.1(2)(i), (i.1); 146.1(7.1) · Accumulated income payment: to a resident subscriber, not jointly, and (A) after the 9th year following the year the plan was entered into with every beneficiary 21+ and not EAP-eligible, or (B) in the mandatory termination year (35th year after), or (C) every beneficiary deceased; the plan terminates before March of the following year · See the source · effective 1998-01-01
  4. ↑CRA Guide RC4092, Registered Education Savings Plans · An individual RESP may accept contributions until the end of the 31st year after the year it was opened and must terminate by the end of the 35th year (ITA 146.1(2)(h)–(i)); RESPs have existed since 1972 · See the source · effective 2008-01-01
  5. ↑ITA 204.94(2) ("D is... in any other case, 20%") · Part X.5 tax on accumulated income payments: (A + B − C) × 20% (12% Quebec), C = the lesser of RRSP deductions claimed under 146(5)/(5.1) in the year (up to the AIP) and the unused part of the $50,000 lifetime · 20% · effective 1998-01-01
  6. ↑ITA 204.94(2) C(b) ("the amount, if any, by which $50,000 exceeds the total...") · Lifetime RRSP rollover relief for accumulated income payments: $50,000 per subscriber · $50,000 · effective 1998-01-01
  7. ↑Canada Education Savings Regulations s.11(3)(a),(c), 11(4) · On termination or an AIP the trustee repays the lesser of the grant + CLB balances and (C × Y)/(Y + G): C = FMV, Y = grant + CLB balances, G = the rest of the plan balance · See the source · effective 2005-07-01
  8. ↑CES Regulations s.10 (EAP components; refund of payments is not an EAP); ITA 146.1(7); CRA RC4092 (the subscriber chooses the split) · A withdrawal from an RESP on the planner form is an education withdrawal — contributions come out first, tax-free; only the remainder is an educational assistance payment, income of the student · effective 2026-09-20
  9. ↑CRA RC4092 (EAP eligibility has no minimum age; this entry records our narrower support) · Education withdrawals are supported only for beneficiaries with year-end age 19+, because the tax engine assesses adults 19–110 · 19 years · effective 2026-09-17