RESP Withdrawals: EAP vs. PSE Explained

When it’s time to use your RESP, it’s important to know what part of the account you’re withdrawing from and how each portion is taxed. Specifically, you’ll encounter two distinct types of RESP withdrawals: Educational Assistance Payments (EAPs) and Post-Secondary Education (PSE) withdrawals.

Understanding the difference ensures you withdraw funds tax-efficiently and avoid surprises when paying for education expenses.

What Are Post-Secondary Education (PSE) Withdrawals?

PSE withdrawals are simply the return of your original contributions to the RESP. These are the funds you personally deposited over the years.

Key Fact	Details
Tax Status	Not taxable — tax was already paid before contributing.
Withdrawal Limits	Any amount can be withdrawn if the beneficiary is enrolled in a qualifying post-secondary program.
Grant Repayment	No grants are repaid when making PSE withdrawals.
Typical Use	Often used first for large expenses like tuition and living costs due to no tax impact.

Note: PSE withdrawals are typically used first for large expenses like tuition and living costs because they have no tax impact.

What Are Educational Assistance Payments (EAPs)?

EAPs are withdrawals made up of:

Government grants, such as the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB).
Investment income and growth earned within the RESP.

Key facts:

EAPs are taxable income to the student beneficiary, not the subscriber.
Since most students have little or no taxable income, EAPs are often taxed at a very low rate—or not at all.
EAPs can be used for a wide range of education-related expenses, including tuition, books, and living costs.

At Optimize, we help you structure EAP withdrawals to maximize tax efficiency while meeting educational needs.

How the Taxation of EAPs Works

When EAPs are paid out:

They are included as income on the student’s tax return.
If the student’s income is below the basic personal exemption (and other credits like tuition tax credits), no tax may be owed.
Even if tax is payable, the impact is usually minimal compared to the benefit of using these funds.

With strategic planning, EAP withdrawals can be managed to minimize tax exposure over the years of study.

Choosing Between PSE and EAP Withdrawals: A Strategic Approach

While you can choose to withdraw from either PSE (contributions) or EAP (grants and growth), a thoughtful strategy often involves:

Withdrawing EAPs early, especially when the student has little or no income.
Preserving PSE withdrawals for flexibility, since they can be accessed anytime and are tax-free.
Balancing withdrawals across the academic years to avoid large taxable income spikes for the student.

Optimize helps you plan these withdrawals to align with your child’s tuition timeline, cash flow needs, and overall tax situation.

How Optimize Helps You Manage EAPs and PSE Withdrawals Effectively

At Optimize, we guide you through every step of RESP withdrawals to ensure the right funds are accessed at the right time. Our process includes:

Clarifying the difference between EAPs and PSE withdrawals for your specific RESP.
Planning the order and timing of withdrawals for maximum tax efficiency.
Projecting tax impacts on the student beneficiary, avoiding surprises.
Coordinating RESP withdrawals with other family financial considerations, like scholarships, bursaries, or other income.
Reviewing your withdrawal strategy each academic year, adjusting to enrollment status and expenses.

With Optimize’s support, your RESP withdrawals become a well-managed part of your education funding strategy—not a tax complication.