RESPs: How do I access my funds?
How do I start using my Registered Education Savings Plan (RESP)?
• Once a child is accepted into a qualified educational program after high school, he or she could start requesting Educational Assistance Payments from the RESP.
Educational Assistance Payments (EAPs)
An EAP is the amount paid to a beneficiary (a student) from an RESP to help finance the cost of post-secondary education. An EAP consists of the Canada Educational Savings Grant, the Canada Learning Bond, amounts paid under a designated provincial program and the earnings on the money saved in the RESP. The promoter reports EAPs in box 042on a T4A slip and sends a copy to the student. The student includes the EAPs as income on his or her return for the year the student receives them.
The promoter can only pay EAPs to or for a student if one of the following situations applies:
• the student is enrolled in a qualifying educational program. This includes students attending a post secondary educational institution and those enrolled in distance education courses, such as correspondence courses, provided by such institutions; or
• the student has attained the age of 16 years and is enrolled in a specified educational program.
A beneficiary is entitled to receive EAPs for up to six months after ceasing enrolment, provided that the payments would have qualified as EAPs if the payments had been made immediately before the student’s enrolment ceased.
Limit on EAPs
For RESPs entered into after 1998, the maximum amount of EAPs that can be made to a student as soon as he or she qualifies to receive them is:
• for studies in a qualifying educational program – $5,000, for the first13 consecutive weeks in such a program. After the student has completed the13 consecutive weeks, there is no limit on the amount of EAPs that can be paid if the student continues to qualify to receive them. If there is a 12-month period in which the student is not enrolled in a qualifying educational program for13 consecutive weeks, the $5,000 maximum applies again; or
• for studies in a specified educational program – $2,500, for the 13-week period whether or not the student is enrolled in such a program throughout that 13-weekperiod.
Subject to the terms and conditions of the RESP, the promoter can supplement the $5,000 or $2,500 EAP by paying a portion of the contributions tax-free to the beneficiary.
Human Resources and Skills Development Canada may, on a case-by-case basis, approve an EAP amount of more than the above limit if the cost of tuition plus related expenses for a particular program is substantially higher than the average. For information on how to request approval of an EAP of more than $5,000 or $2,500, promoters should call the Canada Education Savings Program at 1-888-276-3624.
The Qualifying Educational Programs
• Full-time education—In Canada: Usually, a course of study with a duration of at least 3 weeks in a row, with at least 10 hours of instruction or work each week.
• Full-time education—Outside Canada: A program at a foreign educational institution with a duration of at least 13 weeks.
• Part-time education—In Canada: A program with at least 12 hours per month spent on courses.
Programs include apprenticeships as well as other programs offered by:
• trade schools
• universities, and
• other institutions that are also certified by the Minister of Human Resources and Social Development.
See the Master List of Designated Educational Institutions.
RESP funds can be used for full- or part-time studies in a qualifying program.
• Students who need more than $5,000 during the first 13 weeks of enrolment may apply to Human Resources and Social Development Canada for permission to receive a larger amount.
• Following the 13-week period, the beneficiary can get any amount in Educational Assistance Payments.
• Check to see if the terms of your RESP limit the amount of Educational Assistance Payments that your beneficiary can receive. You should ask your RESP Provider for more information.
Remember that Educational Assistance Payments only include the interest and the grant. You can withdraw as much as you want of your own contributions to pay for a child’s education.
Find out more about Qualifying Educational Programs from the Canada Revenue Agency, or call them toll-free at 1-800-959-8281.
How is an RESP taxed if a child decides not to continue education after high school?
• You will not be taxed on the amount you contributed to the RESP, but you will have to pay taxes on the money that you earned in your plan as interest. This money is called “accumulated income”. It will be taxed at your regular income tax level, plus an additional 20 percent.
• The money that you have put into the RESP is returned to you.
• The Canada Education Savings Grant can be shared with a brother or sister if they have grant room available—otherwise, the grant must be returned to the Government of Canada.
• When you close your RESP, you will have to pay tax on the earnings in the RESP. (Although there will be earnings on the Canada Education Savings Grant, the grant must be returned to the Government of Canada.) You may be able to reduce the taxes you have to pay by transferring your accumulated income to either your or your spouse’s Registered Retirement Savings Plan. For more information, see theAccumulated Income Payments section of the Canada Revenue Agency’s Web site.
• Talk to your RESP provider to find out about any conditions that may apply to the plan if your child does not continue his or her education after high school.