How to make smart RESP withdrawals
You've been contributing to a registered education savings plan (RESP)* for years to help your child achieve their dreams. And now it's time to start making withdrawals. But first, there are a few things to consider to make sure they (and you!) get the most out of this investment. Angela Iermieri, Financial Planner at Desjardins, is here to steer you in the right direction.
With guaranteed government grants of 30% (20% in Ontario)* and the advantage of tax-sheltered growth, a registered education savings plan is a smart choice.
To make the most of your RESP and plan your withdrawals strategically, it's important to understand how these plans work.
1. Accumulating funds
The money in an RESP comes from:
- The capital you invested as a subscriber (money contributed to the plan)
- Government grants for the beneficiary
- Returns on capital invested and grants received
2. Withdrawing funds
Once the beneficiary enrolls as a student in an eligible program at a recognized post-secondary school (such as a vocational school, college, CEGEP or university), it’s up to you, as the RESP subscriber, to decide what kind of withdrawals to make. There are two types of withdrawals:
- Capital
- Educational assistance payments (EAPs), which consist of grants and investment income
To be able to receive EAPs, the student needs to provide proof of enrollment.
Features:
- This money belongs to the subscriber (you).
- Withdrawals are not taxable.
- The money can be withdrawn in part or in full, depending on the needs of the subscriber or the student.
- If a withdrawal is made before the beneficiary starts their post-secondary education, grants proportionate to the amount withdrawn will have to be repaid to the government.
- This money belongs to the student* (the beneficiary).
- Withdrawals are taxable for the student.
- EAPs are added to taxable income, but they don't affect the income calculation for financial aid.
- A maximum of $8,000 can be withdrawn for the first 13 weeks of full-time post-secondary education ($4,000 for part-time studies). After that, the beneficiary can keep making withdrawals as needed. No further justification will be required as long as they remain a full-time student and the EAP amount doesn’t exceed the annual threshold set by the Canada Revenue Agency.
How to plan withdrawals
You can continue to benefit from tax-sheltered growth on your capital, even during the withdrawal period.
It’s important to plan EAPs carefully because funds can only be disbursed while the beneficiary is a student, or no later than 6 months after the end of their studies (provided the payments would have qualified as EAPs if they had been made immediately before the end of the student’s enrollment period).
EAPs are taxable for the student, so you should plan a withdrawal strategy that minimizes the tax payable. If the student is your child, it’s also important to consider potential tax implications for yourself (possible loss of tax credits).
If the beneficiary doesn’t pursue eligible post-secondary studies:
You can keep the RESP open in case the beneficiary decides to go back to school later on.
You can change the beneficiary of the RESP, or you can transfer the money in the plan to another beneficiary’s RESP. Under certain conditions, you can keep the grants.
(For more details, see Pay for education using the Registered Education Savings Plan – Canada.ca)
You can close the RESP. In this case, you’ll need to repay any unused grants to the government. You can withdraw the accumulated investment income left in the RESP if you’re eligible for an accumulated income payment (AIP). The AIP can be transferred to a registered disability savings plan (RDSP), ** contributed to your registered retirement savings plan (RRSP)*** or withdrawn. If you decide to withdraw the AIP, the money will be taxable, and an additional tax will also apply.
How to optimize your withdrawal strategy
Things to think about:
The beneficiary’s needs during their studies.
The student’s total income (including EAPs) and eligibility for certain tax credits. Generally speaking, if their taxable income is below the federal basic personal amount ($16,129 for 2025), they won’t have to pay any income tax. That said, a student who earns more than that may be able to reduce the income tax they owe by claiming eligible tuition fees or medical expenses.
Tax consequences for you, if the EAPs are added to your child’s taxable income in Quebec: Note that EAPs are added to the student’s taxable income. This could affect the tax credit you would be able to claim for an amount transferred by an adult child who is enrolled in post-secondary studies, since the tax credit decreases as the child’s income increases.
Your advisor can help you come up with the right withdrawal strategy for your situation.
Important numbers
6 months: Maximum amount of time during which the student can still benefit from educational assistance payments after the end of their studies.
35 years: Deadline to cash out all funds accumulated in the RESP, starting from the year the account was opened.
How to spend the initial capital invested in an RESP upon withdrawal
With an RESP, the benefits are twofold: you can use the accumulated income to help a student pay for school and then help a second child pay for their education, or use it to grow your own savings. In other words, the capital can be reinvested in another child’s RESP, or transferred to another registered plan, like an RRSP or TFSA—as long as you have contribution room available.
* Certain terms, conditions and restrictions apply. For more details, see Registered education savings plan (RESP) – Desjardins or Registered Education Savings Plans and related benefits – Canada.ca.
** Certain terms, conditions and restrictions apply. For more details, see Registered disability savings plan (RDSP) – Desjardins or Registered Disability Savings Plan – Canada.ca.
*** You can only contribute to your RRSP if you have contribution room available. Certain terms, conditions and restrictions apply. For more details, see Registered retirement savings plan (RRSP) – Desjardins or Registered Retirement Savings Plan (RRSP) – Canada.ca.