RESP Withdrawals: How to Pull the Money Out Without Triggering a Tax Bill

The two buckets inside every RESP

Every RESP holds two distinct pots of money, and the bank treats them differently when you withdraw. Knowing which is which is the entire game.

• Original contributions (PSE): The money you (the subscriber) actually deposited. Already taxed; comes out tax-free at any time, to anyone. The bank calls this a Post-Secondary Education withdrawal.
• Growth + government grants (EAP): CESG (the 20-40% Canada Education Savings Grant), CLB (Canada Learning Bond), provincial grants like QESI, and all the investment growth on the entire account. This money is taxed in the student's hands when it comes out. The bank calls this an Educational Assistance Payment.

EAP vs PSE — the practical difference

Because the student is almost always in a low tax bracket — most undergraduates earn well below the basic personal amount of ~$15,705 in 2025 — EAP money is usually taxed at 0%. That is the entire reason RESPs are so powerful: the parent gets the tax-free growth without ever paying tax on it.

The first 13 weeks rule that catches everyone

During the first 13 consecutive weeks of post-secondary enrolment, the maximum EAP withdrawal is capped at $8,000 (full-time studies) or $4,000 (part-time studies). After 13 weeks, the cap goes away — you can withdraw whatever the student needs. This rule is in the Income Tax Act and the bank cannot waive it.

Which bucket should you withdraw first?

Default strategy for almost everyone: drain the EAP bucket first while the student is in school, then use PSE for any remaining costs. Three reasons:

1. EAP money disappears the moment the student stops going to school. If you leave $20,000 of EAP in the account when they finish, you'll either be forced to refund the grants or pay a 20% "Accumulated Income Payment" penalty on top of regular tax (see below).
2. While the student is enrolled, the EAP is taxed at the student's rate (usually $0). After they graduate and start working, that same money — withdrawn as an Accumulated Income Payment — would be taxed at the subscriber's marginal rate plus 20%.
3. PSE (your contributions) can be withdrawn at any time, by anyone, with no tax consequence — there is no time pressure on it. Save it for the years after EAP is exhausted, or for a sibling, or for yourself.

Documents the bank will demand for every EAP withdrawal

• Proof of enrolment letter from the school's registrar (must show the program, the start and end dates of the current semester, and the course load — full-time vs part-time).
• RESP withdrawal request form from your specific institution — every bank has its own format.
• Specified amount and split between EAP and PSE — you tell the bank, they don't auto-split.
• Bank account info for the deposit — usually the student's account for EAP and the subscriber's for PSE.

Allow 1-2 weeks of processing on top of the time it takes the school to issue the enrolment letter. Don't wait until tuition is due to start the paperwork.

What happens if the student doesn't go to school (or only goes for one year)

Three options, in order of pain:

1. Wait. The RESP can stay open for up to 35 years from the year it was opened. Maybe they go back to school later. PSE-eligible programs include trade schools, online programs, and many international universities — not just university degrees.
2. Transfer to a sibling. If the RESP is a family plan, you can shift the contributions and growth to another beneficiary under 21. Grants must follow the original beneficiary's rules — CESG can stay if the new beneficiary qualifies, CLB cannot transfer.
3. Collapse the plan. The CESG and CLB go back to the government. Your contributions come back to you tax-free. The growth — the "Accumulated Income Payment" — comes back to you taxed at your marginal rate plus a 20% penalty tax. You can avoid the penalty by transferring up to $50,000 of AIP into an RRSP if you have contribution room.

Worked example: $54,000 RESP, four-year undergrad

A typical Canadian RESP at the start of first year of university looks something like this: $36,000 of original contributions, $7,200 of CESG, ~$10,800 of growth — total $54,000. The student needs roughly $13,500/year for four years (tuition + living, with the student covering the rest with summer earnings + a small loan).

Because the student's income stayed below the basic personal amount each year, the entire EAP (grants + growth) was withdrawn tax-free. If the family had instead saved EAP for last and pulled all PSE first, they would have been left with $26,000 of EAP locked in the plan after graduation — money they would have either lost back to the government or paid 20%+ tax on.

Planning multi-year RESP withdrawals strategically

RESP withdrawals are not a one-time event. Most beneficiaries are in school for four to six years, and the order in which you draw down EAP grants versus PSE contributions can save thousands in tax. The CRA tracks every dollar at the EAP level — your provider files a T4A in February for the previous year — but the strategy of which year to take which slice is entirely up to you and the subscriber.

The single biggest planning mistake is leaving the largest EAP withdrawals for the final year. By fourth year, many students are working co-op terms, summer internships, or part-time roles that push their personal-tax bracket above zero. An EAP that would have been tax-free at 19 (no other income) suddenly attracts a 20-30% marginal hit at 22. The smarter playbook is to front-load EAP grants and CESG in the first two years when other income is near zero, and back-load PSE contributions (which are tax-free regardless of income) into senior years when the student starts earning.

A four-year drawdown that minimises tax

1. Year 1: Maximum EAP for the term ($8,000 in the first 13 weeks; unlimited afterwards if enrolled full-time). Take all CESG you can while the student has zero other income.
2. Year 2: Continue full EAP. If the student picked up a co-op, watch the cumulative T4A — keep total income below the basic personal amount (~$15,705 federal in 2026) to stay tax-free.
3. Year 3: Switch to PSE-heavy withdrawals if the student begins earning. PSE is your own contribution and never taxable.
4. Year 4: Sweep remaining PSE; only draw EAP up to the room left under the basic personal amount.
5. Year 5+ (grad school): An RESP can stay open up to 35 years. If your student goes to graduate school, EAP windows reset for each new program registration.

Coordination with OSAP and the Canada Student Grant

RESP withdrawals are explicitly excluded from OSAP's income test, so you can take a $10,000 EAP and still receive the full Ontario grant. The same is true for StudentAid BC, AlbertaWorks, and the federal Canada Student Grant. The one quirk: if the subscriber (usually a parent) collapses the RESP and takes back grants as Accumulated Income Payments (AIPs), those AIPs are subscriber income — not student income — and don't affect the student's aid file.

If you have multiple beneficiaries on a family-plan RESP, CESG can be shared between them but the Canada Learning Bond (CLB) is locked to the individual child it was assigned to. When one child decides not to attend post-secondary, the CESG can be transferred to a sibling under 21 — but only up to that sibling's $7,200 lifetime CESG cap. The unused portion gets returned to the government, which is why subscribers with multiple children should plan contributions to keep grant balances roughly equal.

Frequently asked questions