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The ABCs of RESP withdrawals


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How to access school savings the smart way

In Alberta, the average annual tuition fee for an undergraduate university program is over $5000, not including the cost of books, food, and accommodations. For this reason, it’s important to not only build a Registered Education Savings Plan (RESP) but also manage RESP withdrawals carefully, ensuring access to all grants and bonds while minimizing any applicable tax.

RESP withdrawals fall into the following categories:

  • Refund of contributions
  • Educational Assistance Payment (EAP)
  • Accumulated Income Payment (AIP)

Each type has different rules concerning the amount of the payment, when it can be received, who can receive it (subscriber or beneficiary), and how much tax is applied.

Refund of contributions

The money you put into an RESP can be withdrawn at any time. when you take this money out, it’s called a refund of contributions. If a refund of contributions is made whe​n the beneficiary is not attending school, the payment must be made to the subscriber. Although the payment is not taxable, there are claw-back rules in place to ensure that federal and provincial grants are not being abused.

Educational Assistance Payment (EAP)

In addition to the money you put in, earned income and government grants are also part of the RESP. These funds compose the educational assistance payment. 

To access EAP, a beneficiary must be enrolled full- or part-time in a qualifying educational program. The student will be taxed on this income, but since he or she is usually in such a low tax bracket, little or no tax ends up being payable.

Learn more about EAPs

Accumulated Income Payment (AIP)

To recap the first two forms of payment, the subscriber’s original contr​ibutions can be withdrawn at any time and the remaining funds can be accessed when the beneficiary is going to school. So what happens if the beneficiary doesn’t attend school or finishes school without using all the earned income? That’s where the AIP comes in.

Learn more about AIPs

​There is no better way to save for a child’s education than through an RESP. While it may seem complicated, with the help of a trusted advisor​ you can reap the benefits of the RESP and government grants.​​​​​​​​

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Chris Turchansky, CFA - President, ATB Investor Services
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