Once the beneficiary enrolls in post-secondary education and starts making withdrawals, how is this money taxed?
Registered Education Savings Plans are made up of contributions and earnings. • The portion made up of contributions is not taxed when withdrawn for post-secondary education needs. This type of withdrawal is known as a Post-Secondary Education (PSE) withdrawal • The portion made up of earnings, consisting of accumulated income earned on the contributions, the CESG and the growth of the CESG, is taxed in the hands of the beneficiary. This type of withdrawal is known as an Educational Assistance Payment (EAP) withdrawal. However, since the income tax rate of most beneficiaries is generally low, little or no tax will likely need to be paid by the beneficiary When completing an RESP withdrawal for post-secondary education purposes, the Subscriber can choose to withdraw from the plan’s contributions (PSE) or earnings (EAP). Generally, it is recommended to complete EAP withdrawals first in order to use the CESG while it is available. Once the earnings, including the CESG, have been withdrawn
Related Questions
- What happens to the money left in the account after the beneficiary has completed his/her post-secondary education or if the beneficiary decides not to attend college or does not finish college?
- What happens if there is money remaining in an RESP after the beneficiary completes his/her education or the holding period reaches 35 years after the year it was opened?
- Once the beneficiary enrolls in post-secondary education and starts making withdrawals, how is this money taxed?
