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 All the Numbers does

  • Contributions first. A withdrawal from an RESP on All the Numbers 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.
  • Paid out while the child studies. Each RESP pays out in four September payments, in the years the child turns 18, 19, 20 and 21, because most students start college or university in the September after grade 12, the year they turn 18: a quarter of what is in it, then a third, a half, and the rest. Each payment is the same share of your contributions (tax-free) and of the grant and growth (the EAP). The last payment empties the account and closes it, so a plan that runs to your old age no longer stops at the 35-year limit. Spreading the EAP over four years usually keeps each year inside the student's basic personal amount. The $8,000 cap on EAPs in the first 13 weeks of study is not applied: the plan counts whole years, and any EAP above $8,000 in the first year can be paid after the 13th week, in the same tax year.[9]
  • A student the plan can tax. An EAP is taxed on the student's own return, so the child is a person in the plan from the start. They have no income and file a nil return until the year they turn 18; from then the EAPs are taxed to them.[10] Education withdrawals are supported from the year the student turns 18.[11]
  • Not modelled by All the Numbers. No accumulated income payment, 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 All the Numbers has no event for it.

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. All the Numbers applies the age amount, and the spouse amount for a couple; not the caregiver credits.
  • Children, childcare and an RESP for each child · Enter each child's birth year and the plan pays the Canada Child Benefit and your province's child benefit, counts childcare as spending until school age, and pays each child's RESP out as education payments by their early twenties.
  • 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. All the Numbers does not claim it because it does not ask for family income.
  • The savings accounts at a glance · The TFSA, RRSP, FHSA, RESP, RRIF and non-registered account each have their own room, tax treatment and withdrawal rule. This page gives one short paragraph on each, with the entry that covers it in full.
  • 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. All the Numbers 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) × this rate (lower in 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 lifetime rollover relief · 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, 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); our convention · 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. ↑ITA 146.1(1) "educational assistance payment" and "refund of payments", 146.1(7) (EAP in the student's income), 146.1(2)(g.1) (the $8,000 first-13-weeks cap) · Each RESP pays out in four September education payments, in the years the child turns 18, 19, 20 and 21 — a quarter, a third, a half, then all that is left. Each payment is that share of the contributions (a tax-free refund) and the same share of the grant, bond and growth (the EAP, the child's income); the last one empties and closes the account, so a plan may run past the 35-year wind-up. A child already past 18 when the plan starts is paid over the payment years left, or in full in the first September. The $8,000 cap on EAPs before 13 weeks of study (146.1(2)(g.1)) is not applied: the plan is yearly, and any EAP above $8,000 in the first year can be paid after the 13th week (from early December), in the same tax year, so the year's total is the same · See the source · effective 2026-10-13
  10. ↑ITA 146.1(7): EAPs are included in computing the income of the individual they are paid to · A child with an RESP is a person in the plan from its start. Under 18 they may have no income of any kind and are assessed as a nil return; from the year they turn 18 the education payments are taxed on their own return · effective 2026-10-13
  11. ↑CRA RC4092 (EAP eligibility: enrolled in a qualifying or specified educational program; no minimum age) · Education payments start in the year the student turns 18, when most Canadian students start college or university (grade 12 ends in June of that year); the Act sets no minimum age, only enrolment in a qualifying program, and the engine assesses an 18-year-old's return · 18 years · effective 2026-10-16