Withdraw Funds From an RESP
Many Canadians who plan ahead open a registered education savings plan (RESP) for their children. This investment account allows parents, other family members or friends to save money for a college or trade-school education, without paying tax on the earnings that accrue. When it's time to withdraw funds, the size of the payouts and the income bracket of the beneficiary help to mitigate or eliminate taxes on the money invested.
Instructions
Withdraw Funds for College
1. Request up to $5,000 in Educational Assistance Payments (EAPs) during the first 13 weeks of the beneficiary's enrollment in a study program.
2. Request any amount over that for immediate tuition, books or other costs from your RESP personal savings.
3. Repeat this process as necessary throughout school enrollment. After the first 13 weeks, the number and frequency of EAPs is unlimited, up to your total amount allowed.
Withdraw Funds for Other Purposes
4. Withdraw your personal savings at any time during the life of the RESP account. You won't pay tax, but you may have to give up unused grant money. Speak with your provider before you take action.
5. Withdraw your investment earnings when all three conditions for this action have been met: all beneficiaries are 21 and over, the account has been active for 10 or more years and you are still residing in Canada. You will be taxed at your income tax rate plus a penalty of 10 percent.
6. Liquidate your savings and earnings all at once when you have met the above requirements and are certain that the beneficiary will not attend postsecondary school. Government funds must be relinquished, and penalties will apply. Your provider can detail any exceptions to these rules.
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