Are RESP Withdrawals Taxable in Canada?

Quick Answer

Most RESP withdrawals are either tax-free or taxed at your child’s low student rate — not yours. The key is knowing which part of the money is taxable and planning when to take it out.

Key Takeaways

• Your original contributions come out tax-free — you already paid tax on that money before putting it into the RESP.
• Government grants and investment growth (together called Education Assistance Payments, or EAPs) are taxable, but in your child’s hands, not yours.
• Since most full-time students have little income, many end up owing little or no tax on EAPs — though this can vary depending on their total earnings for the year.
• Spreading withdrawals over several school years can help keep your child’s tax bill low.
• Your child will receive a T4A tax slip for any EAP money they receive and must report it on their tax return.

At Embark, we know that saving for your child’s education is one of the most meaningful things you can do. So, when the time comes to use that money, it should feel straightforward. Many Canadian families aren’t sure which taxes apply when withdrawing money from an RESP.

If you’re wondering what’s taxable, who pays, and how to make the most of every dollar, this guide is for you. We’ll break down how RESP withdrawals work, what funds are taxable, and how to avoid common mistakes.

Understanding RESP Withdrawals: Two Types of Money

When your child enrolls in a post-secondary program, you can start pulling money out of the RESP. But not all withdrawals are treated the same by the CRA.

There are two types of funds inside an RESP:

1. Your Contributions

This is the money you put in yourself, out of your own pocket. You’ve already paid income tax on it. When you take it back out, it’s completely tax-free.

2. Investment Earnings and Government Grants (EAPs)

This includes growth from investments inside the RESP, plus any government grant money your child received. Together, these are called Education Assistance Payments (EAPs). EAPs are taxable — but here’s the good news: the tax gets reported by your child, not by you.

What Goes Into an EAP?

EAPs include two things:

Government Grants

Canada offers several grants to help families save for education:

• Canada Education Savings Grant (CESG): The federal government matches 20% of the first $2,500 you contribute each year — up to $500 annually — with a lifetime maximum of $7,200 per child. With an Embark RESP, we automatically apply for every grant you may qualify for on your behalf.
• Canada Learning Bond (CLB): Extra help for low-income families — $500 in the first year the child is eligible, then $100 for each additional year of eligibility, up to age 15 (maximum $2,000 total). No RESP contributions are required to receive the CLB.
• BC Training & Education Savings Grant (BCTESG): A one-time $1,200 grant for families in British Columbia.
• Quebec Education Savings Incentive (QESI): A refundable tax credit equal to 10% of annual net contributions, up to $250 per year and $3,600 lifetime, for eligible families in Quebec.

Investment Income

Any money your RESP earned through capital gains, dividends, or interest is also part of the EAP. This money grew inside the plan tax-sheltered, so it’s taxable when it comes out.

Because EAPs are reported as income by the student, and most students earn little or nothing while in school, the tax is often very low. Canada’s federal basic personal amount lets most people earn a set amount before paying federal income tax — and many students fall well below that threshold. (Check canada.ca each tax year for the current figure.)

What About Your Contributions?

The return of contributions (ROC) is the money you put in over the years. You already paid income tax on this money before depositing it, so the government doesn’t tax it again when you take it out.

There’s also no restriction on how you use your contributions. Unlike EAPs, you don’t have to spend them on tuition or textbooks. You could use them for rent, a trip home, or anything your student needs.

What You Need to Know Before Withdrawing

Embark guides you through every withdrawal step, and it takes just minutes to start the process online. No branch visits necessary. If you’re planning EAP withdrawals, here are the important RESP withdrawal rules to follow:

1. Your Child Must Be Enrolled in a Qualifying Program

To withdraw EAPs, your child must be enrolled in an eligible post-secondary program — a university, college, trade school, or other approved institution.

2. You Need Proof of Enrolment

Before you can access your RESP money, your RESP provider will ask for official confirmation of enrolment. This can be a letter from the school or an enrolment confirmation document.

3. Your Student Gets a T4A Tax Slip

Each year your child receives EAP funds, the Canada Revenue Agency issues a T4A slip showing the total amount received. Your student reports this on their tax return under “Other Income” on Line 13000. Embark makes it easy to access this form online through your account’s student portal

How Much Tax Will My Student Actually Pay?

In most cases, not much. Full-time students usually have low income, so their tax rate is low. Canada’s federal basic personal amount means students can earn a set amount each year before paying federal income tax — and EAPs plus part-time earnings often come in under that threshold. (The basic personal amount is indexed annually; visit canada.ca for the current figure.)

That said, your student could end up with a surprise tax bill if they:

• Withdraw a large EAP amount all at once instead of spreading it out.
• Work a high-paying co-op placement or part-time job in the same year.
• Forget to claim tuition credits and other available deductions.

Simple Strategies to Lower the Tax Bill

Here are a few smart ways to withdraw from your RESP:

Spread EAPs Across Multiple Years

Rather than taking out a large amount in one year, withdraw smaller EAP amounts each year of school. This keeps your student’s income in a lower tax bracket and reduces their overall tax bill.

Use Available Tax Credits

Make sure your student claims the tuition tax credit, their Basic Personal Amount, and any other education-related credits they qualify for. These credits can significantly reduce — or eliminate — taxes owed on EAPs.

Plan Around High-Income Years

If your child is earning more in a particular year — say, from a well-paid co-op term — consider withdrawing fewer EAPs that year. If they take a semester off, hold off on EAP withdrawals entirely.

Common RESP Withdrawal Mistakes to Avoid

Taking Out Too Much in One Year

A large EAP withdrawal in a single year can push your student into a higher tax bracket, leading to a bigger tax bill than necessary.

Forgetting Proof of Enrolment

RESP providers need official confirmation that your child is enrolled in an eligible program before releasing EAP funds. Missing this step can delay access to money your student needs for school. Embark provides examples of proof of enrollment so you know exactly what you need to submit.

Ignoring Your Student’s Total Income

Scholarships, bursaries, and co-op income all count toward your student’s total income for the year. Failing to account for these can create unexpected tax costs when EAPs are added on top.

How Embark Makes Withdrawals Easier

At Embark, we’ve made the RESP withdrawal process simple and clear. We offer:

• Guidance on when and how to withdraw funds to get the most out of your savings.
• Easy document uploads so you can submit proof of enrolment without the hassle.
• A clear account dashboard that shows how much of your upcoming withdrawal is taxable — so there are no surprises.

The Bottom Line

RESP withdrawals don’t have to be confusing. Your own contributions come out completely tax-free. Government grants and investment growth are taxable — but in your child’s hands, not yours. And because most full-time students have low income, many end up paying little or no tax on EAPs.

The smartest move is to spread EAP withdrawals over your child’s school years and make sure they claim all the tax credits they’re entitled to. With a bit of planning, your family can make the most of every dollar saved. If you’re an Embark member with questions about making withdrawals, our team is here to help — visit embark.ca/making-withdrawals to get started.