Are RESP Withdrawals Taxable?

Saving money toward your child’s post-secondary education is a big financial commitment, so when the time comes to finally tap into your contributions, it should feel rewarding. The truth is, many Canadian families aren’t clear on which taxes apply when withdrawing money from their Registered Education Savings Plan (RESP).

If you’re wondering what funds are taxable, who pays them and how you can make the most out of every dollar you save, this guide is for you. In it, we go over how RESP withdrawals work, what funds are taxable, and how to avoid common mistakes.

What Are Education Assistance Payments (EAPs)?

Education assistance payments (EAP) make up the taxable portion of your withdrawals. They consist of:

1. Government Grants

Canada Education Savings Grant (CESG)

A federal government grant that matches 20% of your RESP contributions up to a lifetime maximum of $7,200 per child.

Canada Learning Bond (CLB)

Additional grant money for low and middle-income families, offering $500 for the first year the child is eligible, and $100 for each following year, up to the age of 15 for a total of up to $2,000.

British Columbia Training & Education Savings Grant (BCTESG)

Families in British Columbia can receive up to $1,200 to put toward their child’s education enrolment at a designated educational institution.

Quebec Education Savings Incentive (QESI)

Eligible families in Quebec can receive a refundable tax credit equal to 10% of their annual net contributions, up to a maximum of $250 per beneficiary per year, with a lifetime total of $3,600.

2. Investment Income

Your investment income consists of any investment income earned through capital gains, dividends, and interest.

So, who pays the tax on educational assistance payments? All EAPs are taxed in the hands of the student. With most full-time students earning little to no income during the time they’re pursuing post-secondary education, the good news is that they often don’t owe much tax at all.

EAPs can be used toward tuition, textbooks, rent, and other education costs.

Return of Contributions (ROC)

The return of contributions (ROC) refers to the money you specifically deposited in your child’s RESP. This portion of the funds can be withdrawn tax-free, as you will have already paid tax on this money before contributing it.

There are no restrictions on what you can use your contributions for. For example, your contributions don’t have to be spent on tuition, books, or rent. You could use it for a plane ticket home, a new car, or even to support your child if they decide to take a semester off. At the end of the day, it’s your money.

When and How RESP Withdrawals Are Taxed

If you plan on withdrawing money from your RESP, especially as EAPs, there are a few RESP withdrawal rules and processes you need to be aware of:

1. Your Student Must Be Enrolled in a Qualifying Educational Program

To make educational withdrawals, your child must be enrolled in a qualifying post-secondary education program. These include universities, colleges, trade schools, some international institutions, and other educational institutions on a pre-approved list.

2. You Need Proof of Enrolment

Before you can access your RESP money, you’ll need to give your RESP provider proof of your child’s enrolment. This can be anything from a certified letter to a confirmation of enrolment from the school.

3. The Students Get a T4 Slip

Each year your child receives EAPs, they’ll be issued a T4A slip, which will outline the total amount withdrawn. This amount will then be reported on their income tax return under “Other Income,” on Line 13000.

Tax Implications for Students

Again, because students often have little to no income while they’re in school, their marginal tax rate is low. For example, as of 2025, the Basic Personal Amount in Canada is roughly $15,000. That means your student can earn up to that amount tax-free, including EAPs or income they make at a part-time job.

Avoid Surprise Tax Bills

Some students might unexpectedly owe tax if they:

• Withdraw large EAP amounts in a single year rather than over time.
• Have a higher-paying part-time job or co-op through school.
• Forget to claim tuition credits and other tax credits.

Strategies to Minimize Tax Impact

To minimize the taxable portion of your RESP funds, here are some smart ways to withdraw:

Withdraw EAPs Gradually

Avoid large, lump-sum EAP withdrawals. Instead, spread your EAP withdrawals over the years your child is enrolled in post-secondary education to make sure they stay within the lower income tax bracket.

Use Available Tax Credits

Make sure your child claims:

• The tuition tax credit.
• Education-related credits, if available.
• Their basic personal amount for the year.

Plan Your Withdrawals

To avoid increasing their taxable income for the year, avoid withdrawing EAPs if your student is taking a year off or working a high-paying co-op.

Common RESP Withdrawal Mistakes to Avoid

Watch out for these common RESP withdrawal mistakes:

Withdrawing Too Much in a Single Year

Avoid withdrawing too many EAPs in a single year. This can raise your students’ taxable income for the year, resulting in them paying higher taxes.

Not Providing Proof of Enrolment

RESP accounts require official confirmation that your child is enrolled in an eligible post-secondary program. Forgetting this can delay your student’s access to funds they’ll need to use to pay for their school expenses.

Ignoring Tax Planning

If you don’t consider your child’s total income, such as scholarships, part-time jobs, and co-op income, you might accidentally create a tax bill for them. Make sure to review your child’s expected taxable income for the year to avoid paying high taxes.

How Embark Simplifies RESP Withdrawals

With customized financial guidance from Embark, RESPs don’t have to be confusing. We offer:

• Expert advice on how and when to withdraw funds efficiently.
• Easy document uploads to confirm enrolment.
• Customer dashboards that show how much of a withdrawal is taxable and non-taxable, so you can plan strategically.

Conclusion: RESP Withdrawals Can Be Tax Smart

RESP withdrawals don’t have to be confusing or stressful. The key is understanding what is and isn’t taxable, so your student can report the withdrawals on their taxes. With strategic planning and the help of available tax credits, the good news is that most students pay little or no tax at all.

To make the most of your RESP, consider spreading out withdrawals or leaving larger withdrawals for years when your student isn’t making a lot of money. Embark can guide you every step of the way to ensure you maximize your tax savings.