Registered Education Savings Plans (RESPs) are tax-assisted savings vehicles
designed to help families accumulate savings for the post-secondary education
of their children. Contributions to RESPs may be eligible for government
matching grants, such as the Canada Education Savings Grant. Low- and
middle-income families may also qualify for Additional Canada Education
Savings Grants or the Canada Learning Bond.
Increasing Educational Assistance Payment withdrawal limits
When an RESP beneficiary is enrolled in an eligible post-secondary program,
government grants and investment income can be withdrawn from the plan as
Educational Assistance Payments (EAPs) in order to assist with post-secondary
education-related expenses. EAPs are taxable income for the RESP beneficiary.
The Income Tax Act requires that RESPs place limits on the amount of EAPs that
can be withdrawn. For beneficiaries enrolled full-time (i.e., in a program of at
least three consecutive weeks’ duration requiring at least 10 hours per week
of courses or work in the program), the limit is $5,000 in respect of the first
13 consecutive weeks of enrollment in a 12-month period. For beneficiaries
enrolled part-time (i.e., in a program of at least three consecutive weeks’
duration requiring at least 12 hours per month of courses in the program), the
limit is $2,500 per 13-week period.
Budget 2023 proposes to amend the Income Tax Act such that the terms of
an RESP may permit EAP withdrawals of up to $8,000 in respect of the first
13 consecutive weeks of enrollment for beneficiaries enrolled in full-time
programs, and up to $4,000 per 13-week period for beneficiaries enrolled in
part-time programs.
These changes would come into force on Budget Day. RESP promoters may
need to amend the terms of existing plans in order to apply the new EAP
withdrawal limits. Individuals who withdrew EAPs prior to Budget Day may be
able to withdraw an additional EAP amount, subject to the new limits and the
terms of the plan. The Income Tax Act allows for EAPs to be withdrawn up to six
months after a beneficiary ceases to be enrolled in an eligible program.
(Please see our next post to read the article).
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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