Are RESP Withdrawals Taxable?

If you withdraw money out of your Registered Education Savings Plan (RESP), are there taxes that you need to pay the government? Read further to find out more.

Andrew Moran
By Andrew Moran
Edited by Taj Schlebusch

Published May 31, 2021.

First, it is important to note that you have up to 35 years after the account was created, so there is no rush to either withdraw the money or shut the RESP down.

With that out of the way, the subscriber has already paid taxes on the post-secondary education (PSE) payments. The funds grow tax-free in your RESP, which means you also do not receive a tax deduction for the funds you inserted into the RESP.

Taxable Income

When the funds are withdrawn, the education assistance program (ESP) is viewed as taxable income for the beneficiary or student. However, since students earn little to no income, the tax implications are not as severe.

What happens if your child chooses not to attend college or university?

The amount you contributed will not be taxed, and the funds will be returned to you. That said, the income you earned during this period will be penalized because it is referred to as "accumulated income."

Final Thought

One more thing, it is a prudent idea to monitor any EAP funds in your RESP when the account is closed. Any amount that was either grant or bond money will be required to be repaid to the government.

Moreover, any investment earnings can be transferred to another registered account, namely a Registered Retirement Savings Plan (RRSP).