How RESP EAP Is Taxed in the Student’s Hands (and Why It Can Be Low)

You worked hard to save in an RESP. Now your child is in school and starting to take money out. You may have heard that part of that money is “taxable.” That word can sound scary, but it does not always mean a big tax bill.

This guide explains how Educational Assistance Payments, also called EAPs, are taxed in the student’s hands. It shows where the money goes on tax forms, why tax can be low for many students, and walks through four short examples to make it clear.

One quick note before we start. This page shares general information, not personal tax advice. For your own family’s case, check the CRA website for more information.

Quick answer — how is EAP taxed?

An EAP is the part of an RESP withdrawal that comes from government grants and investment growth. The CRA treats it as income for the student. The RESP promoter (the company that holds the RESP — Embark, for example) issues a T4A slip to the student each year an EAP is paid. The student then enters that same amount on line 13000 of their tax return.

How much tax the student pays depends on their total income for the year and the credits they can use. Many students have low income and helpful credits, so the tax owed on an EAP can be small.

What an EAP includes (and why the CRA treats it as income)

An EAP is made up of money that the student and family did not pay in. It includes:

• The Canada Education Savings Grant (CESG)
• The Canada Learning Bond (CLB)
• Any provincial grants paid into the RESP
• The investment earnings on contributions, grants, and bonds

None of this money came out of the family’s own pocket. That is why the CRA counts it as income to the student.

This is different from a Post-Secondary Education (PSE) payment. A PSE payment is a return of the contributions the subscriber put in. Those contributions were already taxed before they went into the RESP. So, PSE money is not taxed when it comes back out. To learn more about how EAPs fit into an RESP, see our guide on what role EAPs play in RESPs.

What tax slip you will receive and how to report it

When the RESP promoter pays an EAP, two important things happen by tax time:

• The promoter issues a T4A slip to the student.
• Box 042 on that T4A shows the EAP amount paid for the year.

The student then puts that box 042 amount on line 13000, which is the “Other income” line of the federal tax return. That is where this kind of income belongs.

A short checklist if a parent helps file the student’s return:

• Make sure you have every T4A slip the student received.
• Match the box 042 total to line 13000.
• Keep a copy of all slips with the student’s tax records for at least six years.

For more on how and when money comes out of an RESP, see our guide on withdrawing from your RESP, or contact an Embark specialist.

Why tax can be low for students (mechanics, not promises)

Many students pay less tax than they expect on EAPs. There are two big reasons for this.

One is the basic personal amount. Every person who files a return in Canada gets a credit called the basic personal amount. It is shown on line 30000 of the federal return. This credit lets you earn a set amount of income each year before federal tax kicks in. Each province also has its own basic amount. For a student with low total income, this credit alone can wipe out much of what they owe.

Another factor is Tuition amounts. A student who pays tuition can usually claim a tuition tax credit. They fill out Schedule 11 and report tuition on line 32300. Any tuition amount the student does not need this year can carry forward to a future year when their income is higher. The student may also be able to move some of the current-year amount to a parent or grandparent, up to $5,000 per year.

Other helpful items can include the student loan interest credit and certain moving expenses for school.

None of this means tax will always be zero. But these credits often shrink the bill in a real way. If you are trying to figure out how an EAP will land alongside a student’s other income, Embark’s team can walk you through the timing options — though the tax numbers themselves are best left to a tax pro. To see how RESPs and student aid line up with income, see do RESPs count as income.

Four examples — how outcomes can change

These examples are for learning only. Real results depend on the student’s full tax picture and the province they live in.

Example 1: Student with no job income (EAP only)

• EAP for the year: $8,000
• Other income: $0
• Tuition paid: $6,000 (claimed on Schedule 11)

Likely result: With the basic personal amount and the tuition credit, this student’s total federal tax could be low. Any tuition the student does not need this year could carry forward to a future year. Any tuition the student does not need this year can carry forward to a future year.

Example 2: Student with a part-time job

• EAP for the year: $7,000
• Part-time job earnings: $9,000
• Tuition paid: $5,500

Likely result: Adding the EAP and the job income raises total income. The basic personal amount and tuition credits still help significantly. Tax may still be on the low side, but a small amount could be owed. Adding the EAP and the job income raises total income. The basic personal amount and tuition credits still help a lot. Tax may still be on the low side, but a small amount could be owed.

Example 3: Co-op or internship year

• EAP for the year: $5,000
• Co-op earnings: $25,000
• Tuition paid: $3,000 (one term in school)

Likely result: With higher work income, more of the EAP could be taxed. The student may owe more than in a typical school year. Some families choose to take less EAP in a strong co-op year, so income does not stack as much. For ideas on timing and amounts, see the smart way to withdraw.

Example 4: Mature student or higher-income year

• EAP for the year: $10,000
• Other income: $45,000 (for example, a full-time job earlier in the year before going back to school)
• Tuition paid: $4,500

Likely result: This student may sit in a higher tax bracket, and as a result, the EAP could push the total bill up. Credits still help, but they may not fully offset the tax owed. This student may sit in a higher tax bracket. The EAP could push the total bill up. Credits still help, but they may not fully cancel the tax owed.

The takeaway from these examples is simple. The EAP itself does not set the tax bill. The student’s whole tax picture sets it.

Common mistakes to avoid

A few small mistakes can cause stress at tax time. Here are the ones we see most:

• Missing the T4A. The slip is issued to the student, not the parent. Make sure the student shares it with whoever files their return.
• Thinking “taxable” means “bad.” Taxable just means it counts as income. Tax credits often lower the actual amount that’s owed.
• Taking too much EAP early on. In the first 13 weeks of school, the CRA caps EAPs at $8,000 for full-time studies and $4,000 for part-time studies. To pay more than that early on, the promoter must ask the CRA for approval. The contribution part of the RESP can still be paid out tax-free during this time.
• Mixing up EAP and student aid rules. EAP, scholarships, bursaries, and OSAP can each have different tax rules. For more, read RESP and OSAP, what’s the difference.

A simple wrap-up

EAPs help pay for school, and yes, they count as income for the student. But “income” is not the same as a big tax bill. The CRA gives students helpful tools like the basic personal amount and tuition credits. These can soften the hit at tax time in a real way.

The main steps to remember are simple:

• Look for the T4A slip.
• Put the box 042 amount on line 13000.
• Use the student’s credits, like the basic personal amount and the tuition amount on Schedule 11.

If you want a closer look at timing or amounts, Embark’s team is here to walk through your plan. You can also explore more in our guide on withdrawing from your RESP.

For more information on how these apply to your personal tax situation, speak to an Embark specialist.