Strategies for Smart RESP Withdrawals

Last week, we talked about how to supercharge your RESP contributions to give your kids a bright, student loan-free financial future. Now, let’s talk about the next step—what happens when it's time to start withdrawing that hard-earned money.

If your child is headed off to university or college, it’s time to tap into the RESP and start paying for those tuition bills, textbooks, and maybe even a bit of extra coffee money (trust me, they’ll need it!). But wait, you can’t just pull out all the cash at once without a plan. There are some rules—and some smart strategies—you’ll want to know about.

Lesson 1: The EAP Limit

The magic word for RESP withdrawals is EAP—Educational Assistance Payment. This is the part of the RESP that includes the government grants and the income your money earned while sitting pretty in that RESP account. But here’s the catch: there’s a limit to how much EAP your child can take out in the first 13 weeks of school. That limit is $8,000 ($4000 for part-time students). After that, you can withdraw more based on your child’s education costs.

There is no limit to withdraw from your own contributions and those can be withdrawn tax-free.

Lesson 2: Maximize Withdrawals with Tax Smarts

Here’s a little secret sauce: EAP withdrawals are taxed in the hands of your child. The good news? Most students don’t have much taxable income, which means they’ll pay little to no tax on those withdrawals. This is where you can really make the most of your RESP, especially if your child has tax credits like the basic personal amount or tuition tax credits to offset the taxes.

Pro tip: Don’t delay those EAP withdrawals for too long. It’s smarter to use up the EAP portion early while your child’s income is still low. In their final year of school, they might have summer jobs or co-ops making their EAP potentially taxable.

Lesson 3: A+ Strategy – The Power of Planning

Now that you know the ins and outs of RESP withdrawals, it’s all about planning. Create a strategy where you withdraw just enough EAP to avoid heavy taxes, and then use the rest of the money to cover education costs.

Remember, education is expensive, but a well-executed RESP withdrawal strategy can make sure you maximize every penny you’ve saved. Plus, with a little planning, you’re not just funding their education—you’re setting them up for financial success long after they’ve graduated.

We’re going to use a real-world example to show you how to stretch a $50,000 RESP over 4 years of post-secondary schooling—and do it in a way that’s tax-efficient and future-focused.

Let’s say you’ve saved up a total of $50,000 in your child’s RESP, which includes government grants and growth. Now, the question is: how do you withdraw those funds without paying unnecessary taxes and still cover all the costs of education?

Year 1: EAP Basics and Limits

In the first year of your child’s university, they’re super excited and so are you—because it’s time to start using that RESP! But remember, for the first 13 weeks of school, there’s a limit on how much EAP (Educational Assistance Payments) can be withdrawn. That limit is $8,000. But say you need $10,000 for their first year :-

• Withdraw $8,000 of EAP to start paying for tuition, books, and other expenses. Since your child is likely earning little to no income in their first year of school, they won’t be hit with a heavy tax bill on this withdrawal. The EAP is taxed in the hands of your child, but thanks to basic personal tax credits, they’ll probably owe nothing.
• Withdraw $2,000 of your own contributions. This amount is not taxable to you or your child.
• Balance in the RESP: $40,000

Year 2: Increase Withdrawals as Needed

By year two, your child is fully settled into their program, and you can withdraw more than the $8,000 limit, since the initial 13-week restriction has passed.

• Withdraw another $20,000 from the RESP, with a portion of this being the remaining EAP and the rest as the contribution you originally made to the account. Remember, your original contributions aren’t taxed when withdrawn, so you have even more flexibility to manage the funds.
• Balance in the RESP: $20,000

Year 3: Adjust for Costs and Future Plans

In the third year, the expenses might rise—think higher tuition or additional living costs. But you can also start thinking ahead about leftover funds and future plans.

• Withdraw another $10,000 from the RESP. By this time, you’ll have dipped further into both the EAP and the contributions. Again, the EAP part will be taxed in your child’s hands, but with their low income as a student, taxes will still be minimal. Any tuition credits they have can also help offset the taxes on EAP.
• Balance in the RESP: $10,000

Year 4: Time to Plan for the Future

By the final year of school, you might be looking at leftover funds. Let’s say you have $10,000 left (Ideally what is left is your own contributions) after accounting for tuition, living costs, and a bit of extra spending money.

• Withdraw $10,000 in the final year to cover the last of their schooling costs.
• Balance in the RESP: $0, but a great future plan in place!

Final Grade : A+ : Smart, Tax-Efficient Strategy

By spacing out withdrawals, managing the EAP portion early when your child has little income, you’ve created a smart RESP withdrawal strategy. This approach not only covers their education expenses but also sets them up for a financially healthy future.

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