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RESP withdrawals and Taxes

Understanding the tax consequences of RESP withdrawals

By Gerry Vittoratos, UFile

Registered Education Savings Plans (RESPs) are a great vehicle to save money for your children’s post-secondary education in a tax efficient way. This article will explain the tax treatment of withdrawing from this plan.

Basics of RESPs

Before we get into the tax treatment of RESP withdrawals, we need to understand certain fundamental concepts of the plan.


Contributions to the plan are made by a subscriber (parent of the child or children) to a promoter (financial institution) for the benefit of the beneficiary (child or children). The plans can be individual plans (single beneficiary) or family plans (multiple beneficiaries).

Contributions into the plan are not tax deductible; however, the earnings within the plan accumulate on a tax-free basis. The contributions and accumulated earnings can stay in the account for up to 35 years after the plan is established.

The lifetime contribution limit per child is $50,000.

Canada Education Savings Grants (CESGs)

Apart from the tax deferral of earnings, another major benefit of contributing to the RESPs is the Canada Education Savings Grant (CESG). In simple terms, the CESG is an additional amount the Federal government adds to every dollar contributed into the RESP. The basic grant is 20% of the current year contributions up to a maximum of $500 per beneficiary. This translates to a yearly contribution maximum of $2,500. The lifetime CESG is $7,200. An additional grant of 10% or 20% is given to low income families. The table below summarizes the grant amount:

CESG Family net income of $47,630 or less Family net income of more than $47,630 but less than $95,259 Family net income of more than $95,259
Basic CESG on the first $2,500 of annual RESP contributions 20% = $500 20% = $500 20% = $500
Additional amount of CESG on the first $500 of annual RESP contributions 20% = $100 10% = $50 Beneficiary is not eligible
Maximum yearly CESG depending on income and contributions $600 $550 $500
Lifetime maximum CESG for which you may qualify $7,200 $7,200 $7,200

Source: RC4092 guide

Depending on the province you live in, you can get an additional grant on top of the CESG.

Canada Learning Bond (CLB)

On top of the CESG above, the Federal government provides an additional amount for low-income families in the form of the Canada Learning Bond (CLB). The difference with the CESG is that fact that no contribution is requires to get the CLB; it is deposited directly into the RESP account. An initial payment of $500 is made for the first year the child is eligible; then $100 is deposited for each additional year of eligibility, up to age 15, for a maximum of $2,000. For 2019-2020, the income eligibility threshold is $47,630 for up to 3 children and increases for every additional child.

Tax treatment of withdrawals

Now to the question at hand: what is the tax treatment of these withdrawals?


Since the contributions do not benefit from a tax deduction (in other words, after-tax dollars were contributed), the contributions can be withdrawn tax free to the subscriber (parent or grandparent of the child or children) or beneficiary (child or children). These are called “refund of contributions”.

Education Assistance Payments (EAP)

Payment of the Canada Education Savings Grant, Canada Learning Bond and accumulated earnings are called Education Assistance Payments (EAP) and are payed to beneficiaries (children). These payments are taxable in the tax return of the beneficiary.

In order to receive an EAP, the recipient must be enrolled in a qualifying educational program, which is an educational program at post-secondary school level, that lasts at least three consecutive weeks, and that requires a student to spend no less than 10 hours per week on courses. The recipient must also be at least 16 years old.

Although the income received by the student is taxable, remember that it is likely that this student has little to no other income to declare while attending school full-time; therefore, these payments will be subject to a low income tax rate.

Accumulated Income Payments (AIPs)

These are payments made from Canada Education Savings Grant, Canada Learning Bond and accumulated earnings to subscribers (parents). These are possible under 3 conditions:

  • the payment is made after the year that includes the 9th anniversary of the RESP and each individual (other than a deceased individual) who is or was a beneficiary has reached 21 years of age and is not currently eligible to receive an EAP (see above)
  • the payment is made in the year that includes the 35th anniversary of the RESP
  • all the beneficiaries under the RESP are deceased when the payment is made

In this case, the income will be taxed in the subscriber’s tax return (income tax rate based on all income), and an additional 20% tax is added as well. Subscribers can reduce both the income tax and the additional 20% by transferring the AIP into an RRSP, provided the subscriber has enough contribution room to do so.  The limit of this transfer is set at $50,000.

Gerry Vittoratos is the national tax specialist at tax software provider UFile, which has been helping millions of Canadian taxpayers file smart for the past 20 years.

Feel Free to Comment

  1. @Ricardo, you are correct, and I learned about that as well. Early on usually your child has less income, so use the TAXED portion of the RESP moneys and thus you don’t give them a nasty surprise when they graduate (i.e. a bill from the CRA to go along with their first year of work taxes)

  2. Not quite comprehensive enough for my liking.
    In Quebec there is also a $250 grant from the government that was not mentioned.
    As for withdrawals, my comprehension of the RESP is that it is comprised of three components. 1) The money deposited in to the account 2) The government grants 3) Capital gains (hopefully)
    When I was withdrawing for my children I was told that I could choose from which part I would like to withdraw first (1, 2 or 3). So I depleted the “taxable” segments first and lastly withdrew money that had been contributed which was not taxable.
    When you child starts their post secondary educating that is the time that their take home pay will probably be lower. As they advance within their studies they may become eligible for grants or bursaries so those would increase their income maybe to the extent that the withdrawals become taxable. SO if you can deplete them right at the beginning it may be more tax effective.
    Once those are depleted then the monies contributed are non taxable.


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