Quick Answer: Which Parts of an RESP Withdrawal Are Taxed?
When you take money out of your child's RESP, only part of it is taxable, and the tax belongs to the student, not the parent.
The money you originally contributed can generally be withdrawn tax-free, because you already paid tax on it before putting it in.
The remaining portion, which includes the Canada Education Savings Grant (CESG), any provincial grants, and the investment earnings, is called an Educational Assistance Payment (EAP), and it is reported on a T4A slip in the student's name.
Because most full-time students have little or no other income, their marginal tax rate is often low or zero, meaning the EAP is frequently taxed lightly or not at all.
Timing the withdrawal mix before year-end can keep more of the plan's growth in the student's hands.
Why This Matters Right Now for Ontario Families
Fall tuition bills have landed, and families across Ontario are quietly moving money out of their Registered Education Savings Plans (RESPs) for the first time. For many parents, this is the first withdrawal they have ever made from an account they have been contributing to for 15 or 18 years. The question that keeps surfacing in client meetings is simple and anxious: will any of this money show up as a tax bill in April?
The short answer is yes, part of it typically will, but almost never on the parent's return. Understanding the mechanics now, before year-end, lets you shape the withdrawal mix so the student's small amount of tax owing stays small. You can explore more Ontario tax guidance in our insights library as you plan.
Quick Start: Pick Your Path
Read the three pots section and the step-by-step roadmap, then stop at the section on how much tax the student will actually pay.
Read the step-by-step roadmap carefully, especially the 13-week withdrawal limit that catches many families off guard in September.
Skip to the step-by-step section, where the proof-of-enrolment rules and part-time EAP cap are explained.
Skip ahead to the Accumulated Income Payment and the RRSP transfer option to avoid the 20% penalty tax.
The Three Pots of Money Inside Every RESP
The first pot is your contributions. These are the after-tax dollars you deposited over the years, up to the $50,000 lifetime limit per beneficiary set out in the Income Tax Act. Because you already paid tax on this money before you contributed it, the Canada Revenue Agency (CRA) does not tax it again on the way out.
The second pot is government grants. The federal Canada Education Savings Grant (CESG) adds 20 cents on every dollar you contributed, up to $500 per year and $7,200 per child in total. Lower-income families may also receive the Canada Learning Bond (CLB). Ontario does not currently offer a provincial top-up, though some other provinces do.
The third pot is investment earnings: the interest, dividends, and capital gains the plan has generated. Grants and earnings are tracked together and come out of the plan as a single withdrawal type called an Educational Assistance Payment, which is taxable to the student.
EAP vs PSE Withdrawal: What's the Difference?
When you request a withdrawal from your RESP promoter, you decide, often in a single form, how much of each type to take. Many families release both in the same transaction without realizing they can split the mix on purpose. That choice matters, because the EAP portion is what shows up on the student's return the following spring.
EAP withdrawals carry a cap in the first 13 weeks of a full-time program: typically $8,000 under current CRA rules at time of writing. Part-time programs have a separate $4,000 cap per 13-week period. PSE withdrawals have no such cap, which is why some families use PSE first in September to cover tuition and shift to EAP in later terms once the 13-week window closes.
There is no single right answer. A student with no other income can often absorb a large EAP tax-free in a single year, while a student working part-time may want to spread EAPs across their program.
| Attribute | EAP | PSE |
|---|---|---|
| What is inside | Grants plus investment earnings | Original contributions only |
| Who is taxed | Student | No one (tax-free) |
| Tax slip issued | T4A (Box 042) | None |
| 13-week limit (full-time) | $8,000 cap | No cap |
| 13-week limit (part-time) | $4,000 cap per period | No cap |
| Proof of enrolment | Yes | Yes |
| Typical timing use | Later-year withdrawals once cap window closes | Early-year withdrawals in first 13 weeks |
How to Request an RESP Withdrawal
The mechanics of a withdrawal are usually handled by your RESP promoter (the bank, credit union, or scholarship plan dealer that holds the plan), but the decisions are yours. Walking through the steps in order avoids the two most common mistakes: missing documentation and taking the wrong withdrawal type.
- 1Get proof of enrolment firstThe student must request a letter or form from their post-secondary institution confirming full-time or part-time enrolment in a qualifying educational program. Promoters will not release an EAP without this document, and the enrolment letter has to match the current academic term.
- 2Decide on the EAP and PSE split before you fill out the formPromoters will ask you to specify both amounts. If you leave the choice to them, you may receive a default mix that does not match your tax plan. A quick calculation of the student's expected income for the calendar year can guide the split.
- 3Stay inside the 13-week cap for the first termThe current CRA limit for the opening 13 weeks is $8,000 of EAP for a full-time student. After that window closes, the cap is lifted and larger EAPs can be released. Part-time students face a $4,000 EAP cap per 13-week period under current rules.
- 4Keep every piece of documentationSave the enrolment letter, the withdrawal request form, the promoter's confirmation, and any T4A slip issued. If the CRA asks a question about the student's income later, this file resolves it quickly. Our guide to T4A reporting rules explains what each box on the slip means.
How Much Tax Will the Student Actually Pay?
Here is why. Every Canadian is entitled to a federal basic personal amount of roughly $15,700 and an Ontario basic personal amount set each year by the province. Together, these two credits mean a student with only EAP income can often earn well into five figures before any tax applies. Our overview of the Ontario basic personal amount for 2026 walks through the exact figures.
Layered on top is the tuition tax credit. The tuition the student is actually paying generates a non-refundable credit that further reduces tax owing on the EAP. The student can also carry forward unused tuition credits or, in some cases, transfer a limited amount to a parent or grandparent.
Where tax does start to bite is when a student holds a well-paying summer job or co-op placement. Combined with a large EAP, the income can push the student into a bracket that is no longer absorbed by the basic amounts. Timing the withdrawal mix is how families typically keep the student's tax bill at zero.
What Happens if Your Child Doesn't Attend Post-Secondary?
Not every RESP ends with a student in a classroom. If the beneficiary chooses not to pursue post-secondary education, the money inside the plan still has to come out, and the rules are different from an EAP.
Your original contributions can still be withdrawn tax-free, as they always could. The grant portion, however, must be returned to the Government of Canada because the beneficiary never used it for its intended purpose. The investment earnings become what the Income Tax Act calls an Accumulated Income Payment (AIP), and this is where many subscribers are surprised.
An AIP is taxed in the subscriber's hands, usually the parent, at their regular marginal tax rate, plus an additional 20% federal tax. On a $30,000 pot of earnings, that extra 20% alone adds $6,000 to the bill. If your tax situation involves large AIPs, review your CRA installment schedule so the extra tax does not trigger interest.
There is a planning tool many families miss: a subscriber with RRSP contribution room can generally transfer up to $50,000 of AIP into their RRSP, which neutralizes both the regular tax and the 20% surtax. The plan must usually have been open for at least 10 years, and the beneficiary must be at least 21 and not attending post-secondary.
Common Mistakes to Avoid
These are the recurring errors ClearWealth sees each spring when parents and students bring in their first RESP-year tax files.
- →Assuming the full withdrawal is taxable to the parent. The EAP portion is taxed to the student, not the subscriber, and misreporting it on the parent's return triggers a CRA reassessment.
- →Taking a large EAP in the first 13 weeks and tripping the full-time cap. The promoter may refuse the request or split it awkwardly, delaying funds the student needs for tuition.
- →Letting the promoter default the EAP and PSE split without a plan. Default splits often release more EAP than a student's income situation calls for, especially in year one.
- →Forgetting that proof of enrolment has an expiry window. A letter from last term usually will not satisfy a current-term EAP request.
- →Overlooking the tuition tax credit when estimating the student's tax owing. Many families assume a large EAP equals a large tax bill when the credit often zeroes it out.
- →Collapsing an RESP for an AIP without checking RRSP room first. The $50,000 RRSP transfer option can wipe out the 20% penalty, but only if the subscriber is eligible.
- →Missing the T4A slip when filing. The slip arrives in the student's name in February, and the CRA already has a copy, so an unfiled T4A is flagged quickly.
Frequently Asked Questions
Do I pay tax when I take money out of my child's RESP?
Is the CESG grant taxable to the student?
Who gets the T4A slip, me or my child?
How much can I withdraw tax-free from an RESP?
What is the difference between an EAP and a PSE withdrawal?
Is there a limit on how much I can take out in the first few weeks of school?
What happens to the RESP if my child does not go to post-secondary?
Can I move RESP earnings into my RRSP?
Plan Your RESP Withdrawals With ClearWealth
Most RESP withdrawal problems come from timing, not tax rules. A short planning conversation before you file the withdrawal request can shape the EAP and PSE mix so the student's return in April holds no surprises, and so none of the grant money gets lost to a 20% surtax that a careful transfer could have avoided. Our team works with Ontario families on first-year withdrawal planning, multi-child staggering, and the AIP decisions that arise when plans mature. Learn more about our tax planning services.
Book a ConsultationSources & References
- Canada Revenue Agency. Registered Education Savings Plans (RESPs). canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps.html
- Employment and Social Development Canada. Canada Education Savings Grant and RESP withdrawal rules. canada.ca/en/employment-social-development/services/learning/education-savings/resp.html
- Canada Revenue Agency. T4A slip (Box 042 - RESP Educational Assistance Payments). canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/completing-filing-information-returns/t4a-statement-pension-retirement-annuity-other-income.html
- Canada Revenue Agency. Accumulated Income Payments (AIPs) and transfers to RRSPs. canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/accumulated-income-payments.html
- Income Tax Act (Canada), sections 146.1 and 204.94. laws-lois.justice.gc.ca/eng/acts/i-3.3/
- Canada Revenue Agency. T1 General Income Tax Package - federal basic personal amount and tuition credit. canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html
- Ontario Ministry of Finance. Ontario personal income tax and credits. ontario.ca/page/personal-income-tax
