Understanding how RESP withdrawals work can help you get the most of your RESP savings. To start you down the right path, we’re going to simplify some of the RESP jargon for you, starting with four key concepts.

• The Subscriber is the person who sets up the RESP and the only person who can contribute to or withdraw from the plan.
• The Beneficiary is the person whom the RESP is for.

To make an RESP withdrawal, the subscriber must provide proof of enrollment of the beneficiary as either a part- or full-time student, in a qualifying post-secondary educational institution.

• The Post-Secondary Education (PSE) withdrawals are withdrawals of the contributions made by the subscriber.
• An Education Assistance Payment (EAP) is a withdrawal of the investment earnings and the government grant portions of the RESP, which can only be paid to the beneficiary. All funds contributed by government programs like the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB), and provincial grants/incentives (including the Quebec Education Savings Incentive and the British Columbia Training & Education Savings Grant), along with any investment income that was earned inside of the RESP, are designated as the EAP portion of your RESP.

Now that you understand there are two types of RESP withdrawals for educational purposes (PSE and EAP), you’re ready to understand how they are taxed differently.

You do not get a tax deduction when you contribute to an RESP and so taxes have already been paid on the money you contribute directly to the RESP, meaning this money can be withdrawn tax-free.

Most students have enough tuition and education tax credits (and a low enough income) that they will likely pay very little or no income tax as a result of RESP withdrawals.

If the student is expecting to pay income tax that year, it may be beneficial to set money aside to pay the tax bill the following year.

There is no limit on the amount of PSE contributions that can be withdrawn.

EAP withdrawals have a $8,000 limit (or $4,000 if the student is enrolled part-time) during the first 13 weeks of schooling. Once the 13 weeks have passed, any amount of EAP can be withdrawn.

If the beneficiary does not pursue post-secondary education, there may be other options other than closing the plan. To fully understand your options, visit the Canada Revenue Agency (CRA) guide on using your RESP funds.

A TD Personal Banker will work with you to understand your goals and develop an RESP withdrawal strategy that helps you make the most of your savings.

Book an appointment to get started.