RESPs for Carpenters: What Qualifies?
Yes, Registered Education Savings Plans (RESPs) can pay for eligible carpentry apprenticeships and trade school programs at designated educational institutions. While enrolled, educational assistance payments (EAPs), which consist of government grants and investment earnings, can be used for tuition, fees, required books or tools, and reasonable living expenses like rent. The contributions (capital) you originally deposit into the RESP can be withdrawn tax-free to help with other expenses.
Make sure to confirm program eligibility beforehand and time your withdrawals properly to avoid government grant clawbacks. An Embark RESP handles eligibility checks, grant applications, and withdrawal timing on your behalf, so families pursuing trades like carpentry can focus on the training, not the paperwork.
RESPs: Not just for traditional universities or colleges
RESPs are not just for universities or colleges; they also support trade schools and apprenticeship training, which includes carpentry. The key requirement for this form of post-secondary education is that the school or program must be considered a designated educational institution in Canada (or abroad).
Before RESP funding is released to students, providers will ask for proof of enrolment, such as a letter from the Registrar’s office.
Contributions and federal government grants
When talking about contributions, aim to deposit $2,500 a year per child to maximize the 20% Canada Education Savings Grant (CESG) match, worth $500 annually and $7,200 lifetime. You can catch up on missed years with larger contributions (up to $5,000 in a year) to receive up to $1,000 in CESG. Just make sure to keep track of your contribution amounts, as the $50,000 lifetime contribution limit per beneficiary still applies. Embark automatically applies for every grant your child qualifies for, including the full CESG match, so you don’t have to track applications or worry about leaving money behind.
RESP support for carpentry
- Eligible schools: Many carpentry apprenticeships and trade school programs qualify as a designated institution.
- Covered by EAPs: Tuition, compulsory fees, required books and supplies, tools, plus reasonable living costs.
- Capital vs. EAPs: Capital is your original contributions (withdrawn tax-free); EAPs, on the other hand, are grants and investment growth (taxable in the hands of the student).
- Paperwork needed: Withdrawal form and proof of enrolment.
- Timing: A 13-week cap applies to full-time and part-time students. Full-time students can withdraw up to $8,000, and part-time program students can withdraw up to $4,000.
- Max grants: Contribute $2,500 to maximize Canadian Education Savings Grant (CESG)
- Avoid pitfalls: Don’t request EAPs before enrolment.
Are carpentry apprenticeships and trade schools RESP-eligible programs?
Yes. Many career paths, including carpentry apprenticeships, pre-apprenticeships, and trade-school diplomas, are RESP eligible, as long as they are offered through a designated education institution. This includes public trade schools, colleges, and union programs across Canada.
To confirm your program’s eligibility, check with your RESP provider or the Canadian government’s list of designated post-secondary education schools. Some programs outside of Canada may also qualify.
RESP: What costs can you cover while training?
RESP withdrawals can be divided into two categories:
EAPs (grants and investment earnings)
EAPs are taxable to the student when withdrawn for education-related expenses, such as tuition, books, tools, and program-specific equipment. They can also pay for rent, groceries, utilities, and other reasonable expenses while your student is enrolled.
Capital (your contributions)
Your original contributions are non-taxable because you have already paid taxes on this money. Once the child is enrolled, you can withdraw capital throughout the calendar year and use it for any purpose. If funds are withdrawn while the beneficiary is not in school, there are grant implications. Most parents use capital to cover larger upfront payments.
Proof you’ll need before RESP funding is released
Before your funds are released, your RESP provider will typically request that a withdrawal form be completed by the account subscriber, along with proof of enrolment in a certified institution.
Withdrawal strategy and first 13-week limit
During the first 13 weeks of enrolment, EAP withdrawals are capped as per RESP withdrawal rules:
- Full-time students: up to $8,000.
- Part-time students: up to $4,000.
After week 13, withdrawals for full-time students are only capped by the annual CRA limits.
Maximize grants for trade paths
Contributing $2,500 annually allows you to collect up to $500 annually from CESG to put toward your child’s education. If you miss a year and have contribution room remaining, you can catch up by contributing $5,000 annually to collect up to $1,000 in CESG.
Low-income families can also qualify for the Canada Learning Bond (CBL), which adds up to $2,000 per child without requiring contributions. Together, CESG and CLB make RESPs a powerful tool that can be used to fund a child’s post-secondary education.
Taxes and avoiding clawbacks
RESP taxation is straightforward when it comes to RESPs:
- EAPs are taxable to the student. As most apprentices earn little during school, their tax obligations are minimal.
- Capital withdrawals are not taxed at all; you’ve already paid taxes on this money.
To avoid clawbacks, request EAPs after enrolment is confirmed. And don’t forget to check your annual contributions to avoid going over the $50,000 lifetime limit. Otherwise, you will be subject to a 1% monthly tax penalty on the excess.
FAQS
Can RESP money be used for rent and other living costs while enrolled?
Yes, other reasonable expenses like rent, groceries, and utilities can be paid for through EAPs
What documents do providers usually require to release RESP funds?
You’ll need a withdrawal form and proof of enrolment.
How can families confirm a specific trade school or program is RESP-eligible?
To see if programs are eligible, check the Government of Canada’s designated institution list or with your RESP provider.
Ready to start saving for your child’s future, whatever path they choose? Open an RESP with Embark today.
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Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.
