# RESP Withdrawal



## piano_key (Oct 17, 2012)

My daughter's RESP (with RBC direct investing) currently has about $80,000 with $50,000 in contributions and the rest is the government grant and accumulated investment income. She is half way through her degree and I plan to withdraw in 2021 all the contributions $50,000 (PSE) plus $15,000 in grant and investment income (EAP), for a total of $65,000. 

I have done some research and it seems there will be no problem with a withdrawal of $65,000 as said above. I'd appreciate confirmations from members who know about RESP withdrawal rules. I am most concerned about the withdrawal of all the contributions ($50,000). Many thanks in advance!


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## AltaRed (Jun 8, 2009)

ISTM I would preferentially take as much of the grant and earnings (EAP) as possible while daughter is still low income and can absorb the taxable income while at the same time using it for tuition, room and board, etc. The PSE part belongs to you anyway. Take the residual out when she is finished schooling.

.https://www.moneytalkgo.com/resp/


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## Plugging Along (Jan 3, 2011)

You can take the $50K any time in any amount tax free. The EAP portion you should withdrawel in whatever manner that has the lowest income tax impact. So you need to consider other income for that year.


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## AltaRed (Jun 8, 2009)

Plugging Along said:


> You can take the $50K any time in any amount tax free. The EAP portion you should withdrawel in whatever manner that has the lowest income tax impact. So you need to consider other income for that year.


Of course, but with just a few years of education left, dont you think it is time to focus on and dispense of the EAP while there are qualifying expenses? The OP needs to clear that out before daughter graduates and starts earning a significant amount of income herself. The focus on the $50k to me is a distraction. Let it continue to earn some EAP qualifying income while using up the EAP.


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## piano_key (Oct 17, 2012)

Thank you both very much for your replies. The $50,000 PSE is needed for an emergency expense; the rest will go to her TFSA.

I plan to withdraw $15,000 EAP this year and $15,000 EAP next year. After her last semester, if she is lucky and finds a job, her income in that year will be high, so I plan to withdraw all the EAP (everything) before that year.


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## AltaRed (Jun 8, 2009)

It is my understanding the EAP may need to go directly to the educational institution via the RESP provider to fund eligible expenses. It is not money that can be used for anything else. 

The OP needs to google some information on that AND talk to their RESP provider on timing of those payments. Here is one description for EAP withdrawals. How to Make EAP Withdrawals from an RRSP | CIBC Wood Gundy


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## fireseeker (Jul 24, 2017)

AltaRed said:


> It is my understanding the EAP may need to go directly to the educational institution via the RESP provider to fund eligible expenses. It is not money that can be used for anything else.


This was not our experience (BMOIL).
EAPs can be sent to the school, to the student or to the subscriber. The tax receipt is issued in the student name in all cases.

We withdrew EAP money from the RESP to my non-registered account. We needed to show proof of enrollment initially, but there were no other issues or restrictions on how we used the money. 
You can see on BMOIL's EAP withdrawal form (pdf) that Section C shows the funds can go to the subscriber. 

Mackenzie Investments likewise says that EAP "payment options include EFT to beneficiary or subscriber(s) or cheque to beneficiary, subscriber(s) or educational institution."


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## OptsyEagle (Nov 29, 2009)

The money does not need to go to any direct educational expenses. As long as she is in a qualifying educational program you can withdraw it all, after the first 3 months of school. The only concern is having all the grant and growth taxed in your daughters name all in one year. If you spread that out over two years you should be fine and she should be able to avoid any taxation. Also, the contributions are yours to take out whenever you want, regardless of education HOWEVER if you do withdraw it for any purpose other then the beneficiaries education, the grant portion of the contributions that are not used for education purposes (20%) will get paid back to the government out of the withdraw. So in other words you could lose 20% of that withdraw, so definitely take it out in your daughter's name, since there is no tax allocated to the contributions and no payback of grant if used for education under the EAP.


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## AltaRed (Jun 8, 2009)

Okay, I stand corrected on how EAP funds can be withdrawn. I was only aware EAP funds had to be withdrawn in the student's name for tax purposes.


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## OptsyEagle (Nov 29, 2009)

One of the confusing factors for RESPs is that to confirm enrolment the administrator of the RESP plan usually requires a receipt for tuition paid. That tends to give the impression that the withdrawals must be related to the tuition expense. That is not the case. The receipt is just to confirm they are truly going to school. I think they have a max withdrawal of $5,000 in the first 3 months and then after that they can take it all out and probably should as long as the student can keep their tax liability below the paying amounts, which usually they can.


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## Covariance (Oct 20, 2020)

OptsyEagle said:


> One of the confusing factors for RESPs is that to confirm enrolment the administrator of the RESP plan usually requires a receipt for tuition paid. That tends to give the impression that the withdrawals must be related to the tuition expense. That is not the case. The receipt is just to confirm they are truly going to school. I think they have a max withdrawal of $5,000 in the first 3 months and then after that they can take it all out and probably should as long as the student can keep their tax liability below the paying amounts, which usually they can.


Technically speaking the institution requires a proof of enrolment. Not a receipt. So if a student starts University in September they will have enrolled before that. Once the student can get that proof of enrolment form, and they have actually started school, the EAP can be processed. This may be before or after they've paid all the tuition owed for that year. The student is only permitted $5k of EAP withdrawals in their first 13 weeks of enrolment. So their next EAP would be available in December in this example.

Contributions can be withdrawn - but only after the students have started post-secondary. Note for a family plan this means the youngest has started post-secondary.

Contributions in the RESP continue to generate income, and this income may attract cash taxes, so it's worth considering moving the contributions to a TFSA if you have room. Note the student themselves can open a TFSA once they turn 18 and have a full years contribution room that year.


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## piano_key (Oct 17, 2012)

OptsyEagle said:


> Also, the contributions are yours to take out whenever you want, regardless of education HOWEVER if you do withdraw it for any purpose other then the beneficiaries education, the grant portion of the contributions that are not used for education purposes (20%) will get paid back to the government out of the withdraw. So in other words you could lose 20% of that withdraw, so definitely take it out in your daughter's name, since there is no tax allocated to the contributions and no payback of grant if used for education under the EAP.


That is the reason why we are withdrawing all the contributions (PSE) now while she is still in school, plus some EAP. The remaining grant and accumulated income will be withdrawn next year.


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## Money172375 (Jun 29, 2018)

Planning our next round of RESP withdrawals. Waiting for the 13 weeks to pass. Took $5,000 out in September As the first withdrawal.

are there any good calculators available to run scenarios? I’m following the strategy of withdrawing larger amounts in early years….while income is lower.

at this point, I guess I’m trying to avoid any taxes payable to determine the next withdrawal next month.

1. recommend online calculators? Are any free 2022 tax software programs available in beta to use?

2. re: T2202. Haven’t received a clear answer from the school. Will the T2022 show the amount of tuition we paid in 2022 (we’ve only paid 50%). So, in the first year of school, the T2022 will only show 4 months of tuition (sept-Dec) or are you permitted to claim the full 2022-23 tuition on the 2022 return.

We’re looking at withdrawing an additional $15-$20k next month.

EDIT - forget question 2. just found out we’ve been billed for the second installment which is due jan 1. So I will pay that before year End and I assume get the full tuition amount to show on T2022.


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## Covariance (Oct 20, 2020)

Money172375 said:


> Planning our next round of RESP withdrawals. Waiting for the 13 weeks to pass. Took $5,000 out in September As the first withdrawal.
> 
> are there any good calculators available to run scenarios? I’m following the strategy of withdrawing larger amounts in early years….while income is lower.
> 
> ...


Which province is the student paying tax in?

You may wish to double check the tuition that can be claimed this year. The T2202's I have seen show the amount in each calendar year. For example if the school year is 2020-2021 and the tuition is $8000 the T2202 in 2020 would show a session period of 2020 09-2020 12 and $4000, Then the T2202 for 2021 would show session period 1 2021 01-2021 04 and $4000 followed by (for second year) session period 2 2021 09-2021 12 $another half year


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## OptsyEagle (Nov 29, 2009)

Also, I think you can choose what type of withdrawal you want to make. So you can choose between CESG, Growth or Capital or a combination of the 3. So if you want a $20,000 withdrawal but only want $10,000 on the T4RESP for 2022, then ask for $10,000 capital and $10,000 of CESG/Growth assuming you have those amounts. 

This only works until your contributed capital is depleted and then everything withdrawn is taxable to the student in the year they receive it.


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## Money172375 (Jun 29, 2018)

Covariance said:


> Which province is the student paying tax in?
> 
> You may wish to double check the tuition that can be claimed this year. The T2202's I have seen show the amount in each calendar year. For example if the school year is 2020-2021 and the tuition is $8000 the T2202 in 2020 would show a session period of 2020 09-2020 12 and $4000, Then the T2202 for 2021 would show session period 1 2021 01-2021 04 and $4000 followed by (for second year) session period 2 2021 09-2021 12 $another half year


Thank you. I’ll try again with the school. It’s in Ontario


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## Money172375 (Jun 29, 2018)

I’m also confused about whether bursaries are taxable.

The school says it will issue a T4a for all bursaries.

CRA uses language around “qualifying”. It appears my child would qualify as a full time student. Do we simply not not put the bursary amount on the T1?

the amount is material. 5 figures.






Line 13010 – Taxable scholarships, fellowships, bursaries, and artists’ project grants - Canada.ca


This page explains how you report scholarships, fellowships, bursaries, and artists' project grants and what to do if you receive this type of income.




www.canada.ca


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## Money172375 (Jun 29, 2018)

Covariance said:


> Which province is the student paying tax in?
> 
> You may wish to double check the tuition that can be claimed this year. The T2202's I have seen show the amount in each calendar year. For example if the school year is 2020-2021 and the tuition is $8000 the T2202 in 2020 would show a session period of 2020 09-2020 12 and $4000, Then the T2202 for 2021 would show session period 1 2021 01-2021 04 and $4000 followed by (for second year) session period 2 2021 09-2021 12 $another half year


This is exactly the clarity I’m trying to get from the school. Wonder if it matters if I actually pay the full years tuition for 2022-23 in 2022? Makes a big difference. Total tuition is $14,000.

I‘ve found some schools are explicit in stating that only fees paid for classes that have been attended will be reported. So in that case, our T2022 would only show approx $7,000. 

that limits my RESP withdrawal unless we want to start paying tax.

I suppose those with very large RESPs ($100k+) can’t avoid paying some tax on the withdrawal.


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## Covariance (Oct 20, 2020)

Money172375 said:


> This is exactly the clarity I’m trying to get from the school. Wonder if it matters if I actually pay the full years tuition for 2022-23 in 2022? Makes a big difference. Total tuition is $14,000.
> 
> I‘ve found some schools are explicit in stating that only fees paid for classes that have been attended will be reported. So in that case, our T2022 would only show approx $7,000.
> 
> ...


Understandable and an area we have extensive experience with. The tax shield at some point does get breached. However, it is worth optimization because of the marginal tax system we have.

In all the cases I have seen the T2202 is as described in my previous post. The Federal Tuition tax credit will use the amount on the T2202. The T2202 also identifies if the student is full or part time and the number of months. This information is the basis for other deductions and credits for students. 

I strongly recommend you contact accounting at your school. Also ask them to walk through how the scholarship will impact the T2202.

As for RESP and how large an EAP can be, you may wish to review the administrative rules regarding limits on withdrawals below. 






RESP Bulletin No.1R1 - Canada.ca


Cette page fournit des renseignements utiles aux émetteurs (compagnies d'assurance, société de fiducie et banques) sur les Régimes enregistrés d'épargne-études (REEE).




www.canada.ca


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## Covariance (Oct 20, 2020)

Money172375 said:


> I’m also confused about whether bursaries are taxable.
> 
> The school says it will issue a T4a for all bursaries.
> 
> CRA uses language around “qualifying”. It appears my child would qualify as a full time student. Do we simply not not put the bursary amount on the T1?


No. it only goes on if there is exceeds the exemption. You'll get a T4A, and you will determine the exemption allowed. Only the amount, if any, in excess of the exemption goes into income.

This gets case specific pretty quickly, but the basic idea is if you are a student and receiving a scholarship that covers part of your actual costs to attend, that you would otherwise need to pay, then that is not brought into income. However, if the scholarship larger or not connected to the program then it's not shielded.


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## Money172375 (Jun 29, 2018)

Thanks. I completely forgot that only the gains and grants are taxable. I was looking at the whole market value, So, the tax burden shouldn’t be that bad In our case.


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## Money172375 (Jun 29, 2018)

Covariance said:


> No. it only goes on if there is exceeds the exemption. You'll get a T4A, and you will determine the exemption allowed. Only the amount, if any, in excess of the exemption goes into income.
> 
> This gets case specific pretty quickly, but the basic idea is if you are a student and receiving a scholarship that covers part of your actual costs to attend, that you would otherwise need to pay, then that is not brought into income. However, if the scholarship larger or not connected to the program then it's not shielded.


Thank you. Do you know if the exemption applies to covering residence costs? Or just tuition? I’ll do some additional research too, but. Ice to hear from others who may have experienced this.

the bursary received is just slightly more than the tuition costs. The residence costs add thousands more.

and there was a separate small bursary ($750) for technology.


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## Covariance (Oct 20, 2020)

Money172375 said:


> Thank you. Do you know if the exemption applies to covering residence costs? Or just tuition?


Yes the exemption will apply to living expenses and tuition. As long as the scholarship meets the other tests and is less than the total cost the student would otherwise pay.


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## Money172375 (Jun 29, 2018)

Covariance said:


> Yes the exemption will apply to living expenses and tuition. As long as the scholarship meets the other tests and is less than the total cost the student would otherwise pay.


My daughter is in the running for a $100k scholarship……well, it’s between her and 499 others. I’ll deal with that should it come to pass next year.


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## Covariance (Oct 20, 2020)

Money172375 said:


> My daughter is in the running for a $100k scholarship……well, it’s between her and 499 others. I’ll deal with that should it come to pass next year.


Best of luck to her!


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## Money172375 (Jun 29, 2018)

Made another withdrawal yesterday from our RESP. Trying to pull a lot of the grant and income out in the first two years.

I keep seeing messages to not withdraw more than $7200 in grants and if you do, you need to repay the amount.

how exactly does that happen? From what I recall, there was no warning when we processed these redemptions at TD. (I could be wrong, it’s been 6+ years since I worked in a branch). You simply select EAP as the withdrawal type.

there is no grant information on my trade request form. The only info I get is after the fact on the trade confirmation. I do know that any EAP does have a portion of grant included, but how exactly would you be able to withdraw more than $7,200 in grants? 

I’ve withdrawn approx. 50% of the income and growth this year. And my trade confirmation shows I’ve received approx $3100 in grant money. So it appears I’m safe, but I’m having trouble understanding how someone could receive more than $7200 in grant withdrawals?

can you initially receive more than $7200 in grants if you have RESPs at different banks?


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## Covariance (Oct 20, 2020)

Money172375 said:


> Made another withdrawal yesterday from our RESP. Trying to pull a lot of the grant and income out in the first two years.
> 
> I keep seeing messages to not withdraw more than $7200 in grants and if you do, you need to repay the amount.
> 
> ...


Can occur with family plans.


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## Money172375 (Jun 29, 2018)

Covariance said:


> Can occur with family plans.


Yes, I had thought about that. I have a family plan with TD, but each has a unique account number assigned to them. and separate account details online. there’s also a master family plan account.


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## Covariance (Oct 20, 2020)

Money172375 said:


> Yes, I had thought about that. I have a family plan with TD, but each has a unique account number assigned to them. and separate account details online. there’s also a master family plan account.


Looks like they have good systems. In other FIs I have personally found and corrected erroneous notional account breakdowns of EAPs.


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## OptsyEagle (Nov 29, 2009)

I don't know how to withdraw more grant then you received. If I recall, on some FI's EAP form itself they would allow you to work out the different types of money you want to make up a particular withdrawal. Those types being growth, grant and original capital. If you don't use an actual EAP form then perhaps the financial institution has a policy on how they allocate the withdrawal when an EAP form is not received. You might want to find that out before you make anymore withdrawals if it is important to you.

For example here is AGF's EAP form where you would tell them to allocate your withdraw between capital and grant/growth.



https://www.agf.com/agf-files/en/forms-and-applications/education-savings-plans-form/fund103-resp-redemption-form-en.pdf



The only thing I remember is that even if you withdraw all the growth and grant under an EAP withdrawal, if you later try to withdraw capital outside of an EAP, the grant amount associated with that amount (20%) will be removed from the account and given back to the government. So that is the only time I know of where grant money is taken back by the government. As long as all the money is removed under a eligible EAP withdraw, that should never happen.


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## off.by.10 (Mar 16, 2014)

OptsyEagle said:


> The only thing I remember is that even if you withdraw all the growth and grant under an EAP withdrawal, if you later try to withdraw capital outside of an EAP, the grant amount associated with that amount (20%) will be removed from the account and given back to the government. So that is the only time I know of where grant money is taken back by the government. As long as all the money is removed under a eligible EAP withdraw, that should never happen.


I don't think that's correct. As far as I know, you only need to give back the grant if the child is not attending post-secondary school. Initial capital is not an EAP and is not taxed for anyone. You can pull all of it out as soon as the child qualifies. And even use it as contributions for the next child, receiving more grant on the same capital.


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## Italicum (Feb 10, 2017)

OptsyEagle said:


> I don't know how to withdraw more grant then you received. If I recall, on some FI's EAP form itself they would allow you to work out the different types of money you want to make up a particular withdrawal. Those types being growth, grant and original capital. If you don't use an actual EAP form then perhaps the financial institution has a policy on how they allocate the withdrawal when an EAP form is not received. You might want to find that out before you make anymore withdrawals if it is important to you.
> 
> For example here is AGF's EAP form where you would tell them to allocate your withdraw between capital and grant/growth.
> 
> ...


that is not an EAP form in which you can tell the FI how to allocate your withdrawal. Rather, it is one in which you can tell how much EAP you are requesting (or PSE or capital withdrawal in the other two checkboxes). There is an EAP formula mandated by the Feds which the FIs are to use Transfers and Payments - Canada.ca to apportion the EAP requested as grant and income.
Given the RESP complexities (e.g. family plans, transfers between FIs, the EAP formula itself) on occasion, EAP overpayments are made by mistake. It is the FIs responsibility to ensure they are not.


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## OptsyEagle (Nov 29, 2009)

Sure. The main question I believe is that the OP indicated that he wanted to make a withdrawal and know how much of the withdraw would be taxed, or better said, make sure the taxable amount was limited. I don't think his FI gave him the option to allocate the withdrawal between capital and growth/grant so as to ensure only so much was taxable to his child. 

The form I provided seems to do that but as @Italicum has indicated the government already has a formula to determine these proportions in advance...so I am also now a little confused here.


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## Covariance (Oct 20, 2020)

Re; The errors with EAPs - can arise when there are multiple accounts (FI A&B don't have the complete picture) and in particular family plans. With family plans the CESG grants are commingled. Occasionally there are admin errors as well.

Re: winding up the plan tax effectively where there are investment earnings (contributions are tax free withdrawal): You can withdraw EAPs up to six months after graduation only. Or the sponsor can transfer the investment earnings into their RRSP and the grants are taken back by the govt. In this case you would need to have the contribution room and there is a future tax liability at the sponsors marginal rate. In other words, you want to draw down the investment earnings through an EAP before the last student reaches graduation + 6 months.


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## Italicum (Feb 10, 2017)

Covariance said:


> Re; The errors with EAPs - can arise when there are multiple accounts (FI A&B don't have the complete picture) and in particular family plans. With family plans the CESG grants are commingled. Occasionally there are admin errors as well.
> 
> Re: winding up the plan tax effectively where there are investment earnings (contributions are tax free withdrawal): You can withdraw EAPs up to six months after graduation only. Or the sponsor can transfer the investment earnings into their RRSP and the grants are taken back by the govt. In this case you would need to have the contribution room and there is a future tax liability at the sponsors marginal rate. In other words, you want to draw down the investment earnings through an EAP before the last student reaches graduation + 6 months.


To add to this correct post, i will mention the AIP (accumulated income payment) option when the plan is terminated. An AIP is a distribution of income (not contribution or grant) from the RESP to the subscriber/sponsor, which may be tax effective, depending on circumstances (subscriber may have a substantial RRSP already and in a low income year and decides to take the AIP in the tax year). This, of course, if the EAP route is no longer an option at termination.


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