Can RESPs Be Used For Rent? What You Need to Know

Paying for your child’s post-secondary education means more than covering the cost of tuition fees and textbooks. For many students, especially those studying away from home, rental payments are one of the largest expenses they have.

The good news? Registered Education Savings Plans (RESPs) can help cover those costs and more.

This guide will walk you through all you need to know about withdrawing funds from your RESP, including what counts as qualifying education expenses and the tax implications you need to keep in mind.

What Counts as an Eligible Expense?

When you withdraw money from an RESP account to pay for post-secondary education, you’ll either receive:

Registered Education Savings Plan (RESP) Capital

This is the money, minus any applicable fees, you originally deposited into the RESP account. These funds can be withdrawn tax-free once enrolled and can be used for any purpose.

Educational Assistance Payments (EAPs)

Educational assistance payments, or EAPs, include money from government grants and investment earnings. They can only be used toward eligible education expenses.

Using education assistance payments, eligible beneficiaries can pay for:

• Tuition fees and other student fees.
• Textbooks, school supplies, and required tools/equipment.
• Reasonable living expenses such as rent, utilities, groceries, and transportation while they are enrolled in a qualifying post-secondary education program.

Proving Enrolment & Program Eligibility

Before your financial institution or RESP provider approves your withdrawals, you’ll need proof of enrolment. Essentially, providers must ensure that beneficiaries are attending an eligible institution and participating in an eligible program.

Typically, you’ll be asked for the following information:

• An official enrolment letter or confirmation of registration.
• Program details (full-time enrolment or part-time enrolment, length of program, start date).
• The school’s designated learning institution number, if your child is studying in Canada, or an equivalent confirmation if they are studying abroad.

Checklist to Avoid Delays:

• Gather proof of enrolment early. You can usually download this directly from your student portal.
• Have your lease or residence contract on file.
• Ask your provider how they prefer to receive documents.

How Much of Your RESP Savings to Withdraw & When

EAP withdrawals are capped during your student’s first 13 consecutive weeks of enrolment:

• Full-time students: Maximum $8,00 in EAPs.
• Part-time students: Maximum $4,000 in EAPs.

These RESP withdrawal rules matter in terms of rent, as they may limit how much you can use early in your semester. For example, if your child’s monthly rent is $1,200, you may want to plan withdrawals accordingly:

• Use your RESP money (capital) to cover your child’s first rental payment and deposit.
• Use EAPs gradually until the cap lifts after 13 weeks.

After 13 weeks, your child can withdraw any amount up to the government’s yearly withdrawal maximum, allowing for more flexibility when it comes to education expenses.

Note that if your child is enrolled in a part-time program, the withdrawal cap will remain in place.

Tax Treatment: Who Gets Taxed on EAPs

Education Assistance Payments (EAP) withdrawn from your child’s account are considered taxable income in the hands of your child, not the subscriber. Because most students have little to no income, the tax they owe will be minimal, if not zero altogether.

Fortunately, students can use tuition credits and other education-related credits to offset their taxes. But planning is key:

• If your child has a part-time job, avoid using larger EAP withdrawals, as this can increase their taxable income and cause them to be taxed at a higher tax bracket.
• Consider timing your EAP withdrawals throughout the entirety of their program to limit taxes as much as possible.

Capital vs. EAP: Which to Use First for Housing

When it comes to paying rent with your RESP, many families wonder whether to draw from contributions (capital) or Educational Assistance Payments (EAPs).
At Embark, we generally recommend using your EAPs first, since these include government grants and investment income that could be clawed back if not used by the time your child finishes post-secondary education. Your contributions, on the other hand, are always yours to withdraw tax-free later.

Use EAPs When:

• Your child is enrolled full-time, and you want to make the most of government incentives like the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), and provincial grants, along with investment income.
• You’re covering ongoing education-related costs such as rent, tuition, or textbooks during the school year.

Use Capital When:

You need to make payments before your child’s enrolment period starts (like a security deposit or first and last month’s rent), since EAPs can only be used within 13 weeks of confirmed enrolment.

Example:

Let’s say you use $2,400 in August for a rental deposit before classes begin. Once your child’s enrolment is confirmed in September, you start withdrawing $1,000 per month in EAPs from September through December to cover rent and other education costs.

That’s a total of $6,400 — with the bulk coming from EAPs to help you use grants and income first, while staying within the $8,000 withdrawal limit for the first 13 weeks of enrolment. This approach balances tax efficiency with practical cash flow management.

Avoiding Government Grant Clawbacks & Common Pitfalls

Failing to withdraw from your RESP correctly can lead to clawbacks of grant money or tax consequences. Avoid these common missteps:

• Contributions beyond the $50,000 lifetime maximum per beneficiary are subject to a 1% tax penalty per month before the excess contributions are withdrawn.
• Keep copies of rent receipts and other educational expenses in case the Canada Revenue Agency (CRA) opts to audit you.

Budgeting Rent with Tuition Fees, Books, and Transit

Higher education involves numerous expenses beyond tuition and rent. To make your RESP funds as sustainable as possible:

• List Fixed Costs First: This includes rent, tuition, meals, and transit passes.
• Plan by Term: Divide your RESP withdrawals across the fall, winter, spring and summer semesters, if taking summer courses, depending on expenses.
• Factor in Other Income: This includes scholarships, bursaries, or part-time jobs.
• Use RESP Money for Essentials: Avoid draining your funds for non-education purposes, as it can risk you running out of funds before your child graduates.

Special Cases (Co-Op, Part-Time, Distance Learning & Gap Terms)

Post-secondary education isn’t always a straight path. Here’s how RESP withdrawals work in special cases:

• Co-Op Programs: Your child may opt to enrol in a co-op on a full or part-time basis. If they are not enrolled full-time, their EAP eligibility may be restricted.
• Part-Time Students: Since EAP caps are lower for part-time programs, you may have less money to cover rent upfront.
• Distance Learning: If your program is online, rent may still be considered an eligible expense. However, your document requirements will be stricter. Ensure you confirm with your provider what you need.
• Gap Terms: If your student takes a break mid-lease, EAPs can’t be withdrawn during periods where they aren’t enrolled in school.

Step-By-Step: Requesting EAP for Rent

When it’s time to use your RESP money for rent, here are the steps you’ll need to follow:

1. Contact Your Provider: Specify that you want to withdraw from your account.
2. Provide Documents: Your RESP provider will not ask for receipts, but they do require proof of enrolment to access funds.
3. Clarify Money Withdrawn: Make sure the withdrawal is coming from the desired source, such as your investment growth, capital, or a combination of both.
4. Submit Requests Early: Many providers need 5 to 10 business days to process your withdrawal requests. Be sure to submit your application early to avoid missing payment deadlines.

Final Thoughts

Withdrawing EAPs, also known as educational assistance payments, from your RESP is a great way to help pay for your child’s rent during their post-secondary school education. With the right strategy, RESP withdrawals can minimize tax implications and ensure your child never runs out of money throughout their program.
Are you ready to make the most out of your RESP? Talk to an Education Savings Specialist from Embark today to start saving and building your child’s education savings strategy!

FAQs

What expenses are eligible for RESP withdrawal?

RESP withdrawals can cover numerous education-related costs. When withdrawing money in the form of an EAP, the funds can be used for tuition payments, textbooks, supplies, tools, and other reasonable living expenses such as rent, transportation, and more.

Can RESPs be used for housing?

Yes, RESPs can be used for rent and other housing costs as long as your student is enrolled in a designated program. Proof of enrolment will be needed before your RESP provider approves your withdrawal.

Can RESP be used for non-educational purposes?

Yes, but with restrictions. RESP contributions, which are the money you deposit, can be used for any purpose. Grants and investment earnings, on the other hand, can only be used for education expenses.