RESP Withdrawals: Take the Money Out, Keep Grants

It's late August in Burnaby, and the tuition invoice just landed. Your daughter starts at SFU in two weeks, the first payment is due, and the RESP you have been feeding since she was in kindergarten is finally the account you get to open. Then the withdrawal form asks a question you were not expecting: how much of this should come out as a return of contributions, and how much as an educational assistance payment?

That one question decides whether you keep the government grant money or hand some of it back. Most families answer it in about four seconds, which is roughly four seconds less than it deserves.

An RESP is really two buckets

Money inside an RESP is tracked in separate pools, and the rules treat them very differently.

The first pool is your own contributions. You already paid tax on that money, so it comes back out tax-free. The Income Tax Act caps lifetime contributions at $50,000 per beneficiary for 2007 and later years (Income Tax Act, s. 204.9).

The second pool is everything the plan earned plus the government money: the Canada Education Savings Grant, the Canada Learning Bond, and provincial top-ups like the $1,200 BC Training and Education Savings Grant, which B.C. children can apply for between their sixth birthday and the day before they turn nine, with no matching contribution required. That second pool leaves the plan as an educational assistance payment, or EAP, and it is taxed in the student's hands rather than yours.

The trap: pulling contributions at the wrong moment

Here is the part that quietly costs families money.

Under the Canada Education Savings Regulations, when contributions that attracted grant are withdrawn and no beneficiary is eligible for an EAP, the trustee has to repay grant to the Minister. The repayment is proportional, calculated as A/B x C, where the grant account balance is scaled by the share of assisted contributions coming out. Take out a chunk of your own money at the wrong time and a slice of the CESG walks out the door with it.

The regulations do carve out exceptions. No grant repayment is triggered when:

• a beneficiary is eligible for an EAP at the time of the withdrawal
• the withdrawal is an eligible transfer to another RESP
• you are removing an over-contribution to reduce tax under Part X.4, and the excess for the year is not more than $4,000

There is a second sting. The same regulations make a beneficiary ineligible for further grant and bond for a period running to the end of the second year after assisted contributions are withdrawn, again with similar exceptions.

Practical translation: don't touch contributions before your child is actually enrolled. Once they are enrolled and EAP-eligible, contributions can come out cleanly.

What the "$8,000 in the first 13 weeks" rule actually says

You will see this rule stated as a flat limit. The statute is a bit more interesting.

Section 146.1 says an EAP can go to a full-time student in a qualifying educational program only if the student either has satisfied the enrolment condition throughout at least 13 consecutive weeks in the 12-month period ending at that time, or the total of that payment and all other EAPs from the promoter in that 12-month period does not exceed $8,000 (Income Tax Act, s. 146.1).

So the shorthand is close but not exact. The $8,000 ceiling applies to a rolling 12-month window, and it lifts once 13 consecutive weeks of qualifying enrolment sit inside that window. The Act also allows the Minister to approve a greater amount in writing for a particular student, which matters for programs with front-loaded costs.

A qualifying educational program means at least three consecutive weeks in length, requiring at least 10 hours per week on courses or work.

Part-time studies have their own number

A student who has turned 16 and is enrolled in a specified educational program, meaning at least three consecutive weeks and at least 12 hours per month on courses, can receive EAPs up to $4,000 in the 13-week period ending at the time of payment (Income Tax Act, s. 146.1).

That matters for the Coquitlam apprentice, or the New Westminster student taking two courses while working. Part-time study is not a reason to leave the RESP untouched.

A sensible withdrawal order

• Get proof of enrolment first, then request anything. Enrolment is what unlocks the grant-safe path.
• Lean on EAPs in the early years, while the student is enrolled and their income is low. Grant paid out through EAPs is capped at $7,200 per beneficiary over the life of the plan (Canada Education Savings Regulations, s. 10), so grant left sitting when studies end can be lost.
• Spread EAPs across calendar years where you can, so a large payment doesn't stack into one tax year for the student.
• Treat contributions as the flexible layer for the tail end, once the grant is out.
• Ask your plan provider to show you the contribution and EAP split in writing before you sign the form. Not every form makes it obvious.

If your child doesn't go, or stops partway

The fallback is an accumulated income payment, or AIP, and the conditions are strict. Section 146.1 allows one only if the payment is made after the 9th year following the year the plan was entered into and every individual who is or was a beneficiary has reached 21 and is not eligible for an EAP. Death of a beneficiary is the other route.

An AIP is taxed as ordinary income and carries an additional tax, set at 20% generally and 12% for Quebec residents (Income Tax Act, s. 204.94). You can soften it: amounts you contribute to your own or a spousal RRSP and deduct under section 146 reduce the base for that extra tax, subject to a $50,000 lifetime figure in the same provision. Government grants still go back. And once the first AIP is paid, the plan must be terminated before March of the following year. Even untouched, an RESP has to end by the last day of the 35th year following the year it was entered into.

Before going there, look at naming a sibling or simply leaving the plan open. Plenty of people start school at 24. Statistics Canada reported that Canadian undergraduate tuition was expected to rise 1.4% to $7,734 for 2025/2026, with graduate tuition up 0.9% to $7,978 and B.C. and Nova Scotia graduate averages expected to exceed $10,000 per year (Statistics Canada, The Daily, September 10, 2025). A plan that stays open keeps compounding against those numbers.

What this doesn't tell you

• Your plan provider's contract can be stricter than the legislation. The Act sets outer limits, not what every promoter will actually process.
• The mix of grant and growth inside an EAP is set by a formula in the regulations. You can't choose to withdraw only investment income and leave the grant.
• BCTESG and other provincial incentives carry their own repayment conditions and residency ties that the federal rules above don't cover.
• The tax result for the student depends on their total income, tuition amounts, scholarships and credits. Two families with identical RESPs can land in different places.
• Group scholarship plans work on their own payment schedules and maturity dates, and general RESP guidance often doesn't apply cleanly to them.
• These figures change. EAP limits have been revised by budget legislation before, so check the current CRA and Employment and Social Development Canada pages in the year you withdraw.

If you are within a year or two of that first tuition bill, it's worth mapping the withdrawal sequence before the deadline pressure arrives. Milo Sarmiento is an independent broker in Burnaby who works with families across Metro Vancouver on RESPs, RRSPs and insurance, in English and Tagalog. Book a free, no-pressure call and walk through your plan's actual numbers together.

*This article summarises published rules and research for general information, is current as of the date shown, and is not personalized financial, tax or legal advice.*

Sources

• Government of Canada, Department of Justice. *Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), section 146.1 (Registered education savings plans)*. https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-146.1.html
• Government of Canada, Department of Justice. *Income Tax Act, section 204.9 (RESP lifetime limit)*. https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-204.9.html
• Government of Canada, Department of Justice. *Income Tax Act, section 204.94 (Part X.5 tax on accumulated income payments)*. https://laws-lois.justice.gc.ca/eng/acts/I-3.3/section-204.94.html
• Government of Canada, Department of Justice. *Canada Education Savings Regulations, SOR/2005-151*. https://laws-lois.justice.gc.ca/eng/regulations/SOR-2005-151/page-1.html and https://laws-lois.justice.gc.ca/eng/regulations/SOR-2005-151/page-2.html
• Statistics Canada. *Tuition in Canada: Modest increases and widening gaps, 2025/2026*, The Daily, September 10, 2025. https://www150.statcan.gc.ca/n1/daily-quotidien/250910/dq250910d-eng.htm
• Province of British Columbia. *British Columbia Training and Education Savings Grant Information*. https://www2.gov.bc.ca/gov/content/education-training/k-12/support/scholarships/bc-training-and-education-savings-grant