Quick Answer
Whether tax is withheld from your RESP withdrawal depends on the type of withdrawal you are making. Contribution withdrawals are generally returned to you tax-free. Education assistance payments (EAPs) go to the student and are reported as the student’s taxable income. Accumulated income payments (AIPs), which occur when RESP earnings are not used for education, are usually subject to regular income tax plus an additional tax. Your RESP provider may be required to withhold that tax before paying you.
Key Takeaways
- RESP withholding tax does not apply to every type of withdrawal.
- Contribution withdrawals are generally tax-free because you already paid tax on that money.
- EAPs are taxable to the student beneficiary, not the subscriber, and are reported on a T4A tax slip.
- AIPs are usually taxable to the subscriber and may have regular plus additional tax withheld.
- Tax form T1171 may allow you to transfer an AIP directly to an eligible registered plan and avoid withholding — but this is not automatic.
- Additional rules may apply to Quebec and non-residents of Canada.
“Will tax be withheld before I receive the money?” The answer depends on which type of RESP withdrawal you are making. This article explains the three main types, when withholding tax may apply to each, and what steps you can take before submitting a request.
Does withholding tax apply to RESP withdrawals?
Sometimes, but not to every withdrawal. The key is identifying your withdrawal type before you plan for tax. There are three main types of RESP withdrawals:
- Contribution withdrawals — a return of the money you contributed
- Education assistance payments (EAPs) — funds that include grants, bonds, and investment growth, paid to the student
- Accumulated income payments (AIPs) — earnings paid to the subscriber when the RESP is not used for eligible education
Each type is treated differently for tax purposes. The table below shows a quick comparison.
RESP withdrawal types and tax treatment
| Withdrawal Type | What It Includes | Who Gets It | Tax Treatment |
|---|---|---|---|
| Contribution withdrawal | Your original contributions | Subscriber | Generally tax-free |
| EAP (Education Assistance Payment) | Grants, bonds, investment growth | Student beneficiary | Taxable to the student; reported on T4A |
| AIP (Accumulated Income Payment) | Accumulated earnings not used for education | Subscriber | Taxable to the subscriber; regular tax + additional tax usually withheld |
Are RESP contribution withdrawals subject to withholding tax?
No. Contribution withdrawals are generally not subject to withholding tax. Because you already paid income tax on this money before putting it in the RESP, you can take it back without it being counted as taxable income again.
Keep in mind that if the RESP is closed without the beneficiary attending eligible post-secondary education, grant repayment rules may apply to the grant portion. But your original contributions are generally returned to you tax-free — this is separate from the grant question.
Are EAP withdrawals subject to withholding tax?
EAPs are not usually described as a withholding tax issue the way AIPs are. However, they are taxable income, just to the student beneficiary, not to you as the subscriber.
An EAP includes government grants like the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB), any provincial incentives, and the investment growth inside the RESP. When the student receives this money, your RESP provider reports it on a T4A tax slip in Box 042. Embark customers can easily access their tax slips online through their account’s student portal.
Because many students have low income during their studies, the tax owing on EAPs may be small. The actual amount depends on the student’s total income for that year, including any part-time earnings or other amounts, so results will vary. EAPs are not tax-free and should always be reported on the student’s return, not the subscriber’s.
Learn more about EAPs: What role do EAPs play in RESPs?
When does withholding tax apply to an AIP?
This is where withholding tax becomes most relevant for RESP withdrawals.
An accumulated income payment (AIP) occurs when the RESP is being shut down and the investment growth inside the plan is not being used for eligible post-secondary education. In most cases, the payment goes to the subscriber (the RESP account holder). Additionally, government grants such as the CESG are generally repaid to the government when an AIP is made — they are not part of the payment to the subscriber.
According to the Canada Revenue Agency (CRA), AIPs are subject to two layers of tax:
- Regular income tax based on your income for the year
- An additional tax of 20% (or 12% for Quebec residents)
Because of this, RESP providers are generally required to withhold both regular and additional taxes on AIP payments before sending you the money. You may receive less than the full AIP amount, with tax held back on your behalf.
For a deeper look:
Accumulated Income Payments |
What happens to an RESP if it’s not used?
If you still have questions, Embark’s Education Savings Specialists are here to help.
Can AIP withholding tax be reduced or avoided?
In some situations, yes — but only if specific conditions are met.
If an eligible AIP is transferred directly to a registered plan such as a Registered Retirement Savings Plan (RRSP), Pooled Registered Pension Plan (PRPP), Specified Pension Plan (SPP), or a spousal or common-law partner RRSP — your RESP provider may be able to skip withholding tax on the transfer. To use this option, the subscriber must have enough RRSP deduction room available, and the transfer must meet CRA’s requirements.
To request this treatment, the subscriber files tax form T1171 (Tax Withholding Waiver on Accumulated Income Payments from RESPs) with their RESP provider before the payment is made. This form asks the provider to transfer the payment directly to the eligible registered plan without withholding tax.
This option is not automatic, and it is not available to everyone. The conditions must be met and confirmed with your provider before you proceed.
See also: RESP withdrawal rules — how to access education savings
What is Tax Form T1172?
Tax form T1172 (Additional Tax on Accumulated Income Payments from RESPs) is used to calculate the additional tax on an AIP that was not transferred to an eligible registered plan. You file this form with your personal tax return for the year you received the AIP.
Your tax software or a tax professional can help you complete this form correctly. You can also find it directly on the CRA website.
What about Quebec RESP withholding tax?
Quebec has its own rules for RESP payments other than EAPs and refunds of contributions. Under Revenu Québec guidelines, source deductions apply at single-payment rates for these payments, and an additional special tax of 8% must also be withheld.
If you or the beneficiary are a Quebec resident, we recommend speaking with your RESP provider or a Quebec tax professional before requesting a withdrawal to make sure the right amounts are withheld.
What about non-resident students or subscribers?
If the student beneficiary or the subscriber is a non-resident of Canada for tax purposes, different rules may apply. Withholding tax rates and reporting requirements can vary depending on tax treaties between Canada and the person’s country of residence.
If anyone named on the RESP is a non-resident, speak with a tax professional before making a withdrawal.
What to ask before requesting an RESP withdrawal
Before you submit a withdrawal request — to Embark or any RESP provider — it helps to have clear answers to these questions:
- Is this a contribution withdrawal, EAP, or AIP?
- Who will receive the payment — the subscriber or the student?
- Will a T4A be issued, and to whom?
- Will tax be withheld at source?
- Are any grants being repaid?
- Is RRSP rollover available for an AIP?
- Is Form T1171 required?
- Is the subscriber or beneficiary a Quebec resident?
- Is anyone a non-resident for tax purposes?
With Embark, it takes just minutes to initiate the withdrawal process, without any branch visits necessary. You can then follow the process on our platform, every step of the way.
Not sure which RESP withdrawal type applies to your situation?
Speak with an Embark Education Savings Specialist
See also:
Withdrawing from your RESP |
How to get my RESP money |
Can I withdraw from an RESP early?
Embark Customer Testimonial
Sarah G.
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“The withdrawal process was extremely smooth. After uploading the verification of enrollment form and making the request, funds were transferred in 3 business days. Very easy and quick process.”
Common mistakes families make with RESP withdrawal tax
- Assuming all RESP withdrawals have withholding tax. Only AIPs typically involve withholding at source.
- Assuming EAPs are tax-free. They are taxable to the student — though often at a low rate.
- Reporting the student’s EAP on the parent’s return. EAPs belong on the student’s T4A and the student’s tax return.
- Missing AIP withholding and additional tax rules. The two-layer tax on AIPs catches many people off guard.
- Assuming RRSP rollover relief is automatic. Form T1171 requires RRSP room and must be filed in advance.
- Forgetting Quebec-specific source deduction rules. Quebec subscribers face additional withholding requirements.
- Not asking who receives the T4A tax slip. Knowing this before withdrawing helps avoid tax surprises.
Related reading:
Are RESP withdrawals taxable? |
RESPs and taxes |
How to file taxes as a student
Frequently asked questions
Is there withholding tax on RESP withdrawals?
It depends on the withdrawal type. Contribution withdrawals are generally tax-free. EAPs are taxable to the student and reported on a T4A tax slip, but withholding at source is not typically how they are handled. AIPs are usually subject to regular income tax plus an additional tax, and RESP providers are generally required to withhold both before paying the subscriber.
Are RESP EAPs subject to withholding tax?
EAPs are not typically described as a withholding-tax situation. They are taxable income to the student, reported on a T4A slip in Box 042. The student reports this income on their tax return, and any tax owing is settled at filing time — not deducted at source the way AIP taxes are.
Are RESP contribution withdrawals taxable?
Generally, no. Contributions were made with after-tax dollars, so they can be returned to the subscriber without being counted as taxable income again.
When does withholding tax apply to an AIP?
Withholding usually applies to AIPs because RESP providers are generally required to withhold both regular and additional tax.
Can Form T1171 reduce AIP withholding tax?
In some cases, yes. If an eligible AIP is transferred directly to an RRSP, PRPP, SPP, or spousal/common-law partner plan, and the subscriber has enough RRSP deduction room, Form T1171 allows the subscriber to ask their RESP provider to skip withholding.
RESP withdrawal tax can feel confusing — but it becomes much more manageable once you know which type of withdrawal you are making. Contribution withdrawals are generally returned to you tax-free. EAPs go to the student and are taxed at their income level. AIPs are where withholding tax most often comes into play, and they carry specific rules that are worth understanding before you act.
If you have questions about your specific RESP withdrawal, Embark’s Education Savings Specialists can help you identify which withdrawal type applies and what to expect before you submit a request.
Ready to make a withdrawal or have questions about your RESP?
