RESP payments, transferring and rolling over RESP property
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- Payments from an RESP
- Refund of contributions to the subscriber or the beneficiary
- Educational Assistance Payments
- Accumulated Income Payments
- RESP payments to a designated educational institution
- Transferring RESP property to another RESP
- Rolling over RESP property on a tax-deferred basis to an RDSP
The promoter can make the following types of payments:
- refund of contributions to the subscriber or to the beneficiary
- educational assistance payments (EAPs)
- accumulated income payments (AIPs)
- payment to a designated educational institution in Canada
- repayment of amounts under the Canada Educational Savings Act or under a designated provincial program
- transfers of property between RESPs
Subject to the terms and conditions of the RESP, the promoter can return your contributions to you tax-free when the contract ends or at any time before.
Promoters do not issue a T4A slip, Statement of Pension, Retirement, Annuity and Other Income, to report these payments. Do not include these payments as income on your income tax and benefit return.
The promoter can also pay the contributions tax-free to the beneficiary. This is in addition to any taxable educational assistance payments. For more information, see Educational assistance payments (EAPs).
An educational assistance payment (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 education savings grant, the Canada learning bond (CLB), amounts paid under a designated provincial education savings programs and the earnings on the money saved in the RESP. The promoter reports EAPs in box 042 on a T4A slip and sends a copy to the student. The student includes the EAPs as income on their income tax and benefit return for the year the student receives them.
A beneficiary must be a resident of Canada in order to receive the CESG or CLB as part of the EAP. Contact the appropriate provincial authorities to determine residency requirements for the eligibility conditions for provincial grants and incentives.
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
- 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.
A qualifying educational program is an educational program at post-secondary school level, that lasts at least three consecutive weeks, and that requires a student to spend no less than 10 hours per-week on courses or work in the program.
A specified educational program is a program at post-secondary school level that lasts at least three consecutive weeks, and that requires a student to spend no less than 12 hours per-month on courses in the program.
A post-secondary educational institution includes:
- a university, college, or other designated educational institution in Canada
- an educational institution in Canada certified by Employment and Social Development Canada (ESDC) offering non-credit courses that develop or improve skills in an occupation
- a university outside Canada that has courses at the post-secondary school level at which a beneficiary was enrolled on a full-time basis in a course of not less than three consecutive weeks
a university, college or other educational institution outside Canada that has courses at post-secondary school level at which a beneficiary was enrolled in a course of not less than 13 consecutive weeks
Limit on EAPs
For RESPs entered into after 1998, the maximum amount of EAPs that can be made to a student as soon as they qualify to receive them is:
- for studies in a qualifying educational program – $5,000, for the first 13 consecutive weeks in such a program. After the student has completed the 13 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 for 13 consecutive weeks, the $5,000 maximum applies again
- for studies in a specified educational program – $2,500, for the 13 week period ending at the time of payment whether or not the student is enrolled in such a program throughout that 13 week period
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.
ESDC 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.
Accumulated income payment (AIPs) are amounts, usually paid to the subscriber, of the income earned from an RESP. An AIP does not include:
- the payment of EAPs
- payments to a designated educational institution in Canada
- the refund of contributions to the subscriber or to the beneficiary
- transfers to another RESP
- repayments under the Canada Education Savings Act or under a designated provincial education savings programs
AIPs cannot be made as a single joint payment to separate subscribers.
An RESP may allow for AIPs when the following conditions are met:
- the payment is made to, or for, a subscriber under the RESP who is resident in Canada
- the payment is made to, or for, only one subscriber of the RESP
When more than one individual is entitled to receive AIPs from the plan, the payments must be made separately to each person. No joint payments are allowed.
Also, any one of the following three conditions must also apply:
- the payment is made after the year that includes the 9th anniversary of the RESP and each individual (other than a deceased individual) who is or was a beneficiary has reached 21 years of age and is not currently eligible to receive an EAP (see Note below)
- the payment is made in the year that includes the 35th anniversary of the RESP, unless the RESP is a specified plan in which case the payment is made in the year that includes the 40th anniversary of the RESP
- all the beneficiaries under the RESP are deceased when the payment is made
We may waive the conditions in the first bullet if it is reasonable to expect that a beneficiary under the RESP will not be able to pursue post-secondary education because they suffer from a severe and prolonged mental impairment. Such requests have to be made by the RESP promoter in writing to the following address:
Registered Plans Directorate
Canada Revenue Agency
Ottawa ON K1A 0L5
An RESP must be terminated by the end of February of the year after the year in which the first AIP is paid.
An AIP is subject to two different taxes: the regular income tax and an additional tax of 20% (12% for residents of Quebec).
This is the tax you calculate when you fill out your income tax and benefit return. It is based on your total taxable income.
You calculate this tax separately, using Form T1172, Additional Tax on Accumulated Income Payments from RESPs. Include a filled out copy of Form T1172 with your income tax and benefit return for the year you receive the AIP. You have to pay the additional tax by the balance due date for your regular tax, usually April 30 of the year that follows the year in which you received the AIP.
Reducing the amount of AIPs subject to tax
You can reduce the amount of AIPs subject to tax up to a lifetime maximum of $50,000, if you are the original subscriber, you acquired the former subscribers’ rights as a consequence of marriage breakdown or, where there is no subscriber of the plan, you are or were the spouse or common-law partner of a deceased subscriber and you meet both of the following conditions:
- You contribute the amount to your registered retirement savings plan (RRSP), pooled registered pension plan (PRPP), or specified pension plan (SPP), or your spouse’s or common-law partner’s RRSP or SPP, in the year the AIPs are received or in the first 60 days of the following year.
- Your RRSP deduction limit allows you to deduct the amount contributed to your RRSP, PRPP, or SPP or your spouse’s or common-law partner’s RRSP or SPP on line 20800 of your income tax and benefit return. Claim the deduction for the year in which any payments are made.
You cannot reduce the AIPs subject to tax if you became a subscriber under the plan after the death of the original subscriber.
By claiming a deduction for a contribution to your RRSP, PRPP, or SPP, you reduce your taxable income, which reduces your regular tax. The deduction for the contribution also reduces the amount of additional tax payable by reducing the amount of AIPs subject to tax (see Form T1172). If the amount of the deduction for the contribution equals the amount of the AIPs, the taxes on the AIPs are zero.
Promoters usually have to withhold regular and additional taxes on AIPs. However, they do not have to withhold tax if both of the following apply:
- the AIPs are transferred directly to your RRSP, PRPP, or SPP or your spouse’s or common-law partner’s RRSP or SPP
- your RRSP deduction limit allows you to deduct the contribution in the year it is made
Fill out Form T1171, Tax Withholding Waiver on Accumulated Income Payments From RESPs, and ask the promoter to transfer the payment directly to your RRSP, PRPP or SPP or your spouse's or common-law partner's RRSP or SPP without withholding tax.
The RESP under which Mary is an original subscriber allows AIPs. In July 2022, Mary received an AIP of $16,000. She filled out Form T1171 to have $14,000 transferred directly by the promoter to her RRSP. Mary’s RRSP deduction limit for 2022 is $14,000. She did not make any other RRSP contributions during the year. She was a resident of Manitoba on December 31.
Mary fills out Form T1172 to determine the amount of additional tax she has to pay for 2022 as follows:
Step 1−Calculate amount subject to the additional tax:
AIP for 2022 ($16,000) − Amount Mary deducts for 2022 for RRSP contributions from an AIP ($14,000) = Amount subject to the additional tax ($2,000)
Step 2−Calculate additional tax payable:
Amount subject to the additional tax ($2,000) × Rate (20%) = Additional tax payable ($400)
Mary reports the AIP of $16,000 on line 13000 and the additional tax on line 41800 of her 2022 income tax and benefit return. She also claims the RRSP deduction of $14,000 on line 20800 and attaches a copy of Form T1172 to her income tax and benefit return.
If Mary had received the amount in January 2022 and transferred it to an RRSP (provided her RRSP deduction limit was sufficient) she could have decided to claim all or part of the deduction for the 2021 tax year. This would have been possible because the amount would have been transferred in the first 60 days of 2022.
However, had she done so, she would not have been allowed to reduce the additional tax because the amount transferred to her RRSP has to be deducted on the income tax and benefit return for the year in which the amount is received.
That is, on her 2022 income tax and benefit return, Mary would determine the additional tax payable based on the full $16,000 of the AIP. The additional tax is $3,200 ($16,000 × 20%).
Reporting AIPs on your income tax and benefit return
- Promoters report the AIPs in box 040 of T4A slip, Statement of Pension, Retirement, Annuity and Other Income, and send a copy to you. You include this as income on line 13000 of your income tax and benefit return in the year you receive it.
- Calculate the additional tax using Form T1172, Additional Tax on Accumulated Income Payments From RESPs. Include a filled out copy of Form T1172 with your income tax and benefit return for the year you receive the AIP.
An RESP may also provide for payments to be made to a Canadian designated educational institution at any time. For example, payments could occur when the plan is left with only a small amount of cash after the subscriber withdraws the contributions as a refund of contributions and one or more of the requirements for accumulated income payments (AIPs) are not met. Generally, the terms of a plan should provide that, if an amount is left in the plan and the conditions for an educational assistance payment or AIP are not met, that amount will be paid to a designated educational institution in Canada, or to a trust for such an institution.
Most transfers from one RESP to another RESP will have no tax implications. This is the case when the transferring RESP and the receiving RESP have the same beneficiary.There are also no tax implications when a beneficiary under the transferring RESP has a brother or sister (under 21 years of age at the time the receiving plan was entered into, unless the receiving plan is a family plan) who is a beneficiary under the receiving RESP.
In any other case, transfers can result in an excess contribution. This is because the RESP contribution history for each beneficiary under the transferring RESP is assumed by each beneficiary under the receiving RESP. We treat each contribution as if it had been made into the receiving RESP. In addition, we treat each subscriber under the transferring RESP as a subscriber under the receiving RESP. This means that they are liable for any tax on excess contribution.
A transfer of assets between individual RESPs may result in the repayment of the Canada Education Savings Grants and Canada Learning Bonds when the transfer occurs between plans held by siblings and the plan receiving the transfer amount is held by a sibling whose age exceeds 20.
Rollovers can be made after 2013 from an RESP to an RDSP. In general term, a subscriber of an RESP that allows accumulated income payments and a holder of an RDSP may jointly elect in prescribed form to rollover an accumulated income payment under the RESP to the RDSP if, at the time of the election, the RESP beneficiary is also the beneficiary under the RDSP.
To qualify for an education savings rollover, the beneficiary must meet the existing age and residency requirements in relation to RDSP contributions. As well, one of the following conditions must be met:
- the beneficiary is, or will be, unable to pursue post-secondary education because they have a severe and prolonged mental impairment
- the RESP has been in existence for at least 35 years
- the RESP has been in existence for at least 10 years and each beneficiary under the RESP has attained 21 years of age and is not eligible to receive educational assistance payments
The education savings rollover to an RDSP will not be subject to regular income tax or the additional 20% tax. The RESP promoter must send Form RC435, Rollover from a Registered Education Savings Plan to a Registered Disability Savings Plan to the RDSP issuer and keep a copy of it on file. This will satisfy the RESP promoter’s requirement to file the election with the CRA.
When an education savings rollover occurs, contributions in the RESP will be returned to the RESP subscriber on a tax-free basis. As well, CESGs and CLBs in the RESP will be required to be repaid to ESDC and the RESP terminated by the end of February of the year after the year during which the rollover is made.
An education savings rollover to an RDSP:
- will be considered a private contribution for the purpose of determining whether the RDSP is a primarily government assisted plan (PGAP), but will not attract Canada Disability Savings Grants (CDSGs)
- will be included in the taxable portion of RDSP withdrawals made to the beneficiary
- may not exceed, and will reduce the RDSP lifetime limit of $200,000
An education savings rollover cannot be made if the beneficiary:
- is not eligible for the disability tax credit (DTC)
- has died
- is over 59 years of age in the year of the contribution
- is not a resident of Canada
An education savings rollover cannot be made if the RDSP holder has not provided their consent to the rollover.
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