RESP Withdrawal rules - Small businessess from 1 to 80 employees outsource your payroll management to us and let us worry about your payroll processing.
RSS Follow Become a Fan

Delivered by FeedBurner

Recent Posts

Tax changes to expect when you’re expecting
2016 Tax Tips for 2015 Filing Year
From Proprietorship to Corporation - When is the Best Time to Incorporate?
Tax Specialists Brief your Clients About CRA Fraud And E-Mail Scams
Bank of Canada cuts rates again

Most Popular Posts

Help your teenager build credit responsibly
Being an Executor of an Estate
Student Line of Credit
Principal Residence Exemption


aliko nutrition store- isotonix
aliko payroll services
canada revenue news and videos
canadian news
Cross border Tax
Disability awareness and Benefits for disabled
estate planning
Home Car Insurance
Income Splitting Strategies in Retirement
kids and money -set your children up for financial success
life insurance
on line safety tips
online safety tips
Real Estate - Investments / Retirement
Retirement planning
Save your money
small business planning
Tax Information for Students
tax news
tax planning
Tech news


January 2016
July 2015
May 2015
April 2015
February 2015
December 2014
November 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013

powered by


RESP Withdrawal rules

RESP Withdrawal rules
RESP Withdrawal rules
Written by Jim Yih
It’s that time of year again when students of all ages head back to school.  For younger students, parents are reminded to think ahead and put money into RESPs to help pay for post secondary education.
For those that are now going to post secondary school, it’s not about putting money into RESPs as it is about getting money out of RESPs.  Let’s walk through an example of Jessica and her daughter Brandi who is going to post secondary college for the first time to help understand the RESP withdrawal rules
Over the years, Jessica has been putting away money into and RESP for Brandi.  Now that Brandi is 17 and going to post secondary education, these RESPs are going to come in very handy
Withdrawals from the RESP
To get money out of the RESP, the first step is to contact the financial institution that holds the RESP (in this case, it’s Jessica’s financial advisor) to request a withdrawal.  The terminology is that the subscriber (Jessica) initiates the withdrawal and not the beneficiary (Brandi).
Related article:  Terminology of RESPs
Proof of education
The RESP beneficiary must attend a qualified post-secondary educational facility as determined by the government.   Proof that the beneficiary is enrolled in a qualifying educational program at a post-secondary school level at a designated educational institution is required.
The definition of a qualifying post secondary education facility is quite broad.  As long as you are getting a certificate or degree, it probably qualifies.  If you are not sure, you can check with the financial institution that holds your RESP or even Canada Revenue Agency (CRA). The government has a Verification of Enrolment Form
In 2007, rules were changed to also allow for part-time studies to count for RESP withdrawals.
Some RESP withdrawals are tax free
If we look at the example of Brandi’s RESP, CRA looks at all the money deposited by her mom as contributions and therefore any withdrawal of these contributions are not taxable.  When Jessica originally put money into the RESP, there was no tax deduction and thus there is no tax on the way out.  These withdrawals are called Post Secondary Education Payments (PSE).
The government looks at the contributions as Jessica’s money.  As a result, it is Jessica who must request the withdrawal.  Jessica can have the money go into her bank account or the money can go directly to Brandi at Jessica’s request.  There is no limit on the amount of PSE that can be withdrawn once the child goes to a qualifying post secondary institution.
Some withdrawals are taxed and restricted
If the contributions can be withdrawn tax free, then the rest of the money in the account is government grants and investment growth.  Any withdrawals of non contributions are considered taxable to the student.  CRA calls this Educational Assistance Payments (EAP).
Unlike withdrawal of contributions (PSE) which is non taxable and the limits are unrestricted, the withdrawals of EAP are not only taxable to the student but also limited in the first year.
There is a $5000 limit on EAP withdrawals in the first 13 weeks of schooling.  When making withdrawals from RESPs, it is important to designate where the money is being withdrawn from because that affects the taxation of the withdrawal.
The final strategy
Brandi has about $27,000 in the RESP account.  $14,000 of the total amount is money that her mom put in and the rest is government money and growth.
Even though Brandi only needs $3500 for tuition and books, her mom wants to take out the $5000 allowed in the first 13 weeks of school.  She decides to give Brandi the $3500 to pay for tuition and books and an extra $500 as a congratulations gift to buy some new clothes.
If Brandi was going to a school overseas where tuition and books are not only more expensive but also the cost of accommodations and living come into play.  If this were the case, Brandi’s mom could take out $5000 of the growth and grant money and then up to $14,000 of the contributions for a total withdrawal of $19,000.
When withdrawing money from RESPs it’s important to understand the RESP withdrawal rules.  It’s especially important to understand the different tax rules when withdrawing money.  Also make sure your advisor or bank understands the rules.  Unfortunately, I have met many people that were not told about the different tax rules for RESP withdrawals.
For more information on RESP withdrawals, visit the Money Smart Blog or buy Mike Holman’s RESP Book.
For more information on RESPs, check out my RESP Online Guide

0 Comments to RESP Withdrawal rules :

Comments RSS

Add a Comment

Your Name:
Email Address: (Required)
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment