When it’s time to withdraw funds from a Registered Education Savings Plan (RESP), tax planning may be involved. It’s all because an RESP is composed of two pools of money, one taxable and one non-taxable – and you choose the pool for each withdrawal.

One pool is your original contributions. Post-secondary education contribution withdrawals, as they’re called, are non-taxable because you made contributions with after-tax dollars. You can take money from this pool in any amount, at any time and for any purpose.

The other pool consists of Canada Education Savings Grant (CESG) funds, any provincial grants and plan earnings. Withdrawals from this pool, Education Assistance Payments, are taxable as income to the RESP beneficiary while she or he is a student.

Post-Secondary Education Contribution Withdrawals

  • Pool consists of original contributions
  • Not taxable

Education Assistance Payments

  • Pool consists of Canada Education Savings Grant funds, any provincial grants, plan earnings
  • Taxable to the student

Withdrawal strategies

You have two goals when drawing down an RESP – minimizing or eliminating tax payable by your child or children and using up the pool of Education Assistance Payments so you take advantage of all the grant money.

When student income is lower.
Many students don’t have to worry about paying income tax, thanks to the basic personal amount and tuition tax credits. This means you can start by withdrawing funds exclusively as Education Assistance Payments. You empty the taxable pool without owing tax, then you take non-taxable post-secondary education contribution withdrawals.

When your child pays income tax.
Your child might owe income tax in a year he or she has a well-paying spring and summer job, paid internship or co-op work term. In such a year, you could pay education costs with non-taxable post-secondary education contribution withdrawals. Use the Education Assistance Payments in years your child’s income is below the taxable threshold.

When education costs turn out lower.
What if you save for a four-year university education, but your child chooses a two-year college program? Or you account for residence costs, but your child chooses a local university and lives at home? You would end up with excess RESP savings. In this situation, you may wish to access Education Assistance Payments first – even if withdrawals from this pool result in your child paying tax. That’s because this pool includes Canada Education Savings Grant funds, and you must refund to the government any unused grant money.


RESPs can fund a variety of learning options beyond traditional colleges and universities – including apprenticeships, trade schools and private academies in Canada and other countries. But if your child doesn’t pursue post-secondary education, you have several options for what to do with RESP funds.

Pay for another child’s education.
You can use the funds for another one of your children, whether you have a family plan or individual RESPs. But you may need to return some Canada Education Savings Grant (CESG) funds to the government – each child can receive a $7,200 maximum of CESG funds for education costs.

Keep the RESP open.
In case your child decides to pursue post-secondary education in the future, you can keep the RESP open for 35 years after the year it was established.

Close the RESP.
When you close an RESP, you receive the amount of your original contributions without tax consequences, and you refund Canada Education Savings Grant funds to the government. The remainder is plan earnings, called the Accumulated Income Amount, which is taxable as income and subject to a 20% penalty.

There is a way to defer the tax and avoid the penalty. You can transfer up to $50,000 of the Accumulated Income Amount to your Registered Retirement Savings Plan (RRSP) or a spousal RRSP. If you don’t have contribution room, you could stop making RRSP contributions until you create enough room to complete the transfer.

The Accumulated Income Amount can also be transferred, tax-deferred and without penalty, to a Registered Disability Savings Plan (RDSP) if the RRSP and RDSP have the same beneficiary.

When you have a family plan

Withdrawals from a family RESP follow the same tax strategies as individual plans. Just be careful with a family plan that you monitor the Education Assistance Payments, which include Canada Education Savings Grant funds, for each child. By the time all children have finished school, you want to empty the Education Assistance Payments pool, while ensuring no beneficiary receives more than their $7,200 maximum of grant money.

Talk to us when it’s time to access your RESP savings, and we’ll help make sure your withdrawals are as tax-effective as possible.

This material was prepared for and published on behalf of your financial advisor and is intended only for clients resident in the jurisdiction(s) where their representative is registered. This material is provided solely for informational and educational purposes and is not to be construed as an offer or solicitation for the sale or purchase of any securities or as providing individual investment, tax or legal advice. Consult your professional advisor(s) prior to acting on the basis of this material. Insurance products are available through advisors registered with applicable insurance regulators. Individual equities are available only through representatives of Assante Capital Management Ltd. In considering any particular investment, please remember that past performance is no guarantee of future performance. Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. Neither CI Assante Wealth Management or its dealer subsidiaries Assante Capital Management Ltd. and Assante Financial Management Ltd., nor their affiliates or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever in respect of the use of this material. CI Assante Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Assante Financial Management Ltd. is a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation (excluding Quebec). © 2022 CI Assante Wealth Management. All rights reserved.