How to Withdraw from RESP: Quick and Easy Guide for Canadians

Your RESP contains three distinct buckets of money. Your original contributions, government grants, and investment earnings. Each gets taxed differently when you withdraw them. Get this wrong and you could face unexpected tax bills or even lose grant money permanently.

The withdrawal rules are complex, but the payoff for getting them right is huge. We're talking about preserving thousands of dollars in education savings.

Smart withdrawal planning can mean the difference between funding four years of university comfortably or scrambling to cover unexpected costs in your child's final year.

What is RESP, How Does it Work and Who is it For?

A Registered Education Savings Plan is Canada's tax-advantaged vehicle for education savings. Three parties make it work: you (the subscriber) open the plan and contribute money, your child (the beneficiary) receives funds for post-secondary education, and your financial institution (the RESP provider) administers the account and investments.

The government sweetens the deal with grants. The Canada Education Savings Grant adds 20% to your contributions up to certain limits, and some provinces offer additional incentives. Your money grows tax-free inside the plan until withdrawal. You can contribute up to $50,000 per beneficiary over the plan's 35-year lifespan.

Education savings plans fund universities, colleges, trade schools, and apprenticeship programs. They work best for families who want government grants and tax-deferred growth to maximize their education savings. Withdrawal planning matters just as much as your contribution strategy.

Quick-Start: Withdraw From Your RESP in 5 Simple Steps

Ready to access your education savings? Here's your step-by-step roadmap to get money out without headaches or tax surprises.

Step 1: Confirm Your Student Qualifies

Your student needs to be enrolled in a qualifying post-secondary program. Universities, colleges, trade schools, and apprenticeship programs all count. Both full-time and part-time students qualify, and international schools work too, though you should verify with your provider first.

Step 2: Choose Your Withdrawal Mix

You have two options here. EAP (educational assistance payment) withdrawals pull from grants plus investment growth and are taxable to your student, but usually result in little or no tax since students typically have low income. PSE (Post-Secondary Education) withdrawals are your original contributions coming back completely tax-free. Most families start with EAPs to take advantage of that low student tax bracket.

Step 3: Complete the Paperwork

Contact your education savings provider and request their withdrawal form. You'll need proof of enrollment like an acceptance letter or registration confirmation, your account number, and Social Insurance Numbers for both you and your student. Each provider has slightly different requirements, so ask what they need specifically rather than guessing.

Step 4: Direct the Money Flow

EAP withdrawals are taxable income for your student, so it's generally advisable that they receive the funds directly to ensure proper tax reporting. PSE withdrawals can go to either you or your student.

Step 5: Monitor What's Left

Track how much remains in each category: your contributions, government grants, and investment earnings. This breakdown helps you plan future withdrawals and avoid surprises later. Most providers can give you a detailed breakdown when you call, so don't hesitate to ask.

Important: The 13-Week Rule

EAP withdrawals are capped at $8,000 for full-time students during their first 13 weeks of enrollment. After that, no limits apply. If you need more money upfront, use PSE withdrawals to bridge the gap since those are always available.

Your original contributions are always yours to withdraw tax-free. The detailed sections below explain advanced strategies for maximizing your tax efficiency.

Know Your RESP Buckets Before You Withdraw

Your education savings plan isn't just one big pot of money. It's actually three separate "buckets" that get taxed completely differently when you pull them out.

The first bucket holds your original contributions. This is money you put in after paying taxes on it. When you withdraw these funds as PSE payments, nobody pays tax again.

The second bucket contains government grants like the CESG and provincial incentives. These funds become taxable income for your student when withdrawn as part of an EAP.

The third bucket holds all your investment growth. Every dollar your plan earned through interest, dividends, or capital gains sits here. Like grants, this money gets taxed in your student's hands during EAP withdrawals.

A typical RESP contains contributions, government grants, and investment income in varying proportions. While you can choose whether to withdraw contributions or Education Assistance Payments (EAPs) first, you can't control the mix of grants and growth within each EAP withdrawal; that ratio is set by government formula.

This distinction matters because the order of your withdrawals can save your family hundreds or thousands in taxes.

Tax-Smart Withdrawal Strategies & High-Net-Worth Tips

The golden rule for education savings withdrawals is simple: pull taxable money into your student's low tax bracket first. Most students earn little to nothing, making them perfect candidates to receive grants and investment growth without paying taxes.

When your student has minimal income (under the basic personal exemption amount, $16,129 for 2025), you can withdraw EAP funds up to that amount. They'll likely owe zero federal taxes on this money, which could otherwise be taxed at much higher rates if withdrawn later. 

But when your student lands that high-paying co-op job, flip the strategy. Use PSE withdrawals instead to avoid pushing them into higher tax brackets.

Families with multiple kids or substantial education savings balances need different tactics. If you have multiple children with RESPs, you can change the beneficiary to a sibling to ensure all funds are used for qualified educational expenses, but withdrawals cannot be split among siblings solely to optimize individual tax credits. 

Watch out for Accumulated Income Payments though - unused funds face a 20% tax plus inclusion in your income as the subscriber.

Timing Rules, Limits & Deadlines

The timing of your education savings withdrawals matters more than you might think. Get it wrong and you could face rejected requests or unnecessary tax bills.

Education Savings Plan Lifespan Deadlines

Your plan doesn't live forever. Plans must close by December 31 of the 35th year after opening. You stop earning contribution room after 31 years. Government grants end when your child turns 17.

These deadlines matter because unused funds in an RESP are not automatically subject to penalty taxes after the 35-year mark. Penalties may apply only if the accumulated income is withdrawn for non-educational purposes when the plan is closed. Plan your withdrawals with these expiry dates in mind.

Smart Calendar Planning

Academic years span two calendar years, which creates a tax advantage you shouldn't ignore. Split your withdrawals between fall and winter terms to spread the student's taxable income across two tax years. This strategy keeps them under tax thresholds each year instead of pushing them into higher brackets.

Documentation Expiry

Your proof of enrollment paperwork is generally valid for the duration of the academic term it covers, and you may need to provide renewed documentation for subsequent terms to avoid withdrawal delays. Nothing's worse than having your withdrawal request rejected because your enrollment confirmation expired last month.

Troubleshooting & FAQs

What happens to RESP if the student drops out mid-semester?

You don't lose the education savings funds if your child drops out. The plan can stay open for up to 35 years. You have several options: keep the plan active in case they return to school later, change the beneficiary to a sibling, or close the plan and handle unused funds through Accumulated Income Payments.

Can I transfer my RESP plan to a sibling?

Yes, but only if you have a family plan. Individual plans can't transfer beneficiaries. The new beneficiary must be under 21 and related to the original beneficiary by blood or adoption. There's no tax penalty for making this change.

How do I handle a foreign university not on the CRA list?

Contact your provider to confirm eligibility. They'll guide you through the process and tell you what extra documentation is needed. Some recognized international universities may qualify, but you'll need official enrollment verification and confirmation that the program meets the specific criteria for Canadian RESP eligibility.

What happens if the student is over 21 when starting school?

Age doesn't disqualify anyone from using education savings funds. Students can access EAP payments regardless of age as long as they're enrolled in qualifying programs. While CESG contributions generally stop after the beneficiary turns 17, there are other age-related rules (e.g., new beneficiaries can't be added to a family RESP after age 21), though these do not affect eligibility for EAP payments.

Can I move leftover money into an RRSP?

Yes, but only under specific conditions. The plan must be at least 10 years old, and all beneficiaries must be over 21 and not pursuing education. You can transfer up to $50,000 lifetime maximum of investment growth (not grants) directly to your RRSP if you have contribution room.

What about part-time students?

Part-time students face different EAP limits. They can withdraw up to $4,000 in EAPs for every 13-week period instead of the $8,000 limit for full-time students. You'll need documentation proving their part-time status from the educational institution.

How long do withdrawals take to process?

Most providers take 5-10 business days to process withdrawals once you submit complete documentation. During peak seasons (August-September), expect longer processing times. Start the process at least 30 days before you need the funds.

For complex situations not covered here, contact Surcon Mahoney Wealth Management for personalized withdrawal strategies tailored to your family's specific circumstances.

Next Steps & Professional Support

Surcon Mahoney Wealth Management provides wealth management and retirement planning services, including guidance on education savings plans such as RESPs.

This information is for educational purposes only. Rules and limits change over time, so consult a qualified advisor or the CRA for your specific situation.

Contact Surcon Mahoney to schedule your consultation today.