Withdrawing from an RESP

You can withdraw the contribution portion of your RESP at any time you wish, tax free. However, the student will be taxed on any accumulated income that you withdraw – this is the portion earned from grants and interest. But because the student usually has a low income and is subject to tax exemptions, the tax they will have to pay is very low, if anything at all. 

You can specify whether you draw money from the contribution portion of the RESP (this is called a Post-Secondary Education Payment or PSE) or from accumulated income (this is called and Educational Assistance Payment or EAP). Because the student is only taxed on the EAP, it is wise to withdraw as much of this as you can tax free when the student’s income is low. If the student has a well-paying summer or co-op job for a semester, it would be best to use the PSE portion at that time. Note that there is a $5000 limit on any EAP withdrawn during the first 13 weeks of school.

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