Payments From an RESP
Source deductions of income tax
If you make a payment under a registered education savings plan (RESP), other than an educational assistance payment or a refund of contributions, you must make a source deduction of income tax at the rate applicable to single payments, that is:
- 14% if the payment is $5,000 or less; or
- 19% if the payment is more than $5,000.
You must also withhold a special tax of 8%.
You are not required to withhold income tax on the first $50,000 if the following conditions are met:
- The payment from an RESP is an accumulated income payment that is made to one of the following persons:
- a subscriber of an RESP;
- an individual or public authority who, before the accumulated income payment, acquired from a public authority rights as sole subscriber of the plan, under a written agreement;
- an individual who, before the accumulated income payment, acquired the subscriber's rights under the plan, pursuant to a decree, order or judgment of a competent tribunal, or under a written agreement relating to a partition of property between the individual and a subscriber of the plan in settlement of rights arising out of, or on the breakdown of their marriage, or de facto or civil union;
- in the absence of such persons, a person who was the spouse of one of the above persons.
- The first $50,000 was transferred to the registered retirement savings plan (RRSP) of an annuitant who is either the beneficiary of the accumulated income payment or the beneficiary's spouse.
- You have reasonable grounds to believe that the beneficiary of the accumulated income payment can deduct the amount transferred to the RRSP from their income for the year.
Example – Calculation of the source deduction of income tax on a payment from an RESP
| Income tax on the single payment | ($70,000 − $50,000) × 19% | $3,800 | |
|---|---|---|---|
| Special income tax | $20,000 × 8% | + | $1,600 |
| Source deduction of income tax | = | $5,400 | |
Transfer of payments
You are not required to withhold income tax on a payment from an RESP if the amount is transferred directly to another plan, such as an RRSP, a registered retirement income fund (RRIF), a deferred profit-sharing plan (DPSP) or a registered pension plan (RPP). If only a portion of the payment is transferred directly to another plan, you must withhold income tax from the portion that is not transferred directly.