RESP Withdrawals: Take the Money Out, Keep Grants

It's the end of September in Burnaby, the fall term is a few weeks old, and your daughter is at SFU. The RESP you've fed since she was in kindergarten is finally an account you get to open. Then the withdrawal form asks something you weren't expecting: how much of this comes 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 back. Most families answer it in about four seconds, roughly four seconds less than it deserves. And if the January instalment is next, you answer it again.

An RESP is really two buckets

Money inside an RESP sits in separate pools, and the rules treat them differently.

The first pool is your own contributions. You already paid tax on that money, so it comes back tax-free. The Income Tax Act still caps lifetime contributions at $50,000 per beneficiary for 2007 and later years (Income Tax Act, s. 204.9). That figure isn't indexed to inflation, so it won't quietly grow on you.

The second pool is everything the plan earned plus 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 pool leaves the plan as an educational assistance payment, or EAP, taxed in the student's hands rather than yours.

The trap: pulling contributions at the wrong moment

Under the Canada Education Savings Regulations, when contributions that attracted grant are withdrawn and no beneficiary is eligible for an EAP, the trustee has to repay grant to the Minister.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: the grant balance gets scaled by the share of assisted contributions coming out. Pull your own money at the wrong time and a slice of the CESG walks out the door with it.

The regulations 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're removing an over-contribution to reduce tax under Part X.4, and the year's excess is not more than $4,000

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make a beneficiary ineligible for further grant and bond to the end of the second year after assisted contributions are withdrawn, again with similar exceptions.

Translation: don't touch contributions before your child is actually enrolled. Once they're enrolled and EAP-eligible, contributions come out cleanly.

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

You'll see this stated as a flat limit. The statute is 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). That $8,000 is unchanged for 2026.

So the shorthand is close but not exact. The 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 lets the Minister 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 long, requiring at least 10 hours a 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 a 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 around a full shift schedule. 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 unlocks the grant-safe path, and most promoters want a current-term letter, not the acceptance letter from spring.

• Lean on EAPs in the early years, while the student is enrolled and their income is low. Grant paid 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. A December request and a January request are days apart and two tax years apart.

• Treat contributions as the flexible layer for the tail end, once the grant is out.

• Ask your provider to show you the contribution and EAP split in writing before you sign. 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 comes 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, up to a $50,000 lifetime figure in the same provision. Government grants still go back. Once the first AIP is paid, the plan has to 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, or the 40th year for a specified plan.

Before that, look at naming a sibling or just leaving the plan open. Plenty of people start school at 24. Statistics Canada's September 16, 2026 release puts weighted average tuition for Canadian undergraduates at $8,021 for 2026/2027, up from $7,772. In B.C. the undergraduate average is $7,117 and the graduate average $11,388, among the highest in the country (Statistics Canada, Table 37-10-0045-01). A plan that stays open keeps compounding against those numbers.

A change that lands in 2028, worth knowing now

If you have a younger child, this one is new. Employment and Social Development Canada says that as of April 2028 the government will automatically open an RESP and deposit the Canada Learning Bond for eligible children born in 2024 or later who aren't named as an RESP beneficiary by age 4. Opt-out requests start in 2027, and from 2028 families of eligible children born before January 1, 2024 can ask the government to open a plan (Canada Learning Bond, automatic enrolment).

That's a floor, not a plan: an account opened that way holds bond money only, since CESG follows contributions.

What this doesn't tell you

• Your provider's contract can be stricter than the legislation. The Act sets outer limits, not what every promoter will process.

• The mix of grant and growth inside an EAP is set by a formula in the regulations. You can't withdraw only investment income and leave the grant.

• BCTESG and other provincial incentives carry their own repayment conditions and residency ties the federal rules above don't cover.

• The tax result for the student depends on their income, tuition amounts, scholarships and credits. Two families with identical RESPs can land in different places.

• Group scholarship plans run 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 ESDC pages the year you withdraw.

If you're within a year or two of that first tuition bill, map the withdrawal sequence before 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 we'll 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. Table 37-10-0045-01, Canadian and international tuition fees by level of study (current dollars), released September 16, 2026. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3710004501

• Statistics Canada. Tuition fees for degree programs, 2026/2027, The Daily, September 16, 2026. https://www150.statcan.gc.ca/n1/daily-quotidien/260916/dq260916e-eng.htm

• Employment and Social Development Canada. Canada Learning Bond: Automatic enrolment. https://www.canada.ca/en/services/benefits/education/education-savings/canada-learning-bond.html

• 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