Accumulated Income Payments

An Accumulated Income Payment is an option for you to withdraw RESP income when the beneficiary is not pursuing post-secondary education and has no intention of doing so before the RESP termination date. In other words, your child isn’t going to school and you want to take the income earned out of the RESP.

What kind of income can be withdrawn as an AIP?

You can take out money that was generated by investment gains, but you can’t take out government grants. Once an AIP is requested, the government grants are sent back to the government. For that reason, it’s important to make sure that the beneficiary is definitely not going to attend post-secondary school (not even in the future) before requesting an AIP.

When can an AIP be requested?

As a Canadian resident, you can receive an AIP if:

• You have held your RESP for at least 10 years
• Your student is at least 21 years of age
• Your student is not eligible for Educational Assistance Payment (EAP)

You can also receive an AIP if:

• Your plan has existed for 35 years; or,
• All of the beneficiaries are deceased.

If you do not qualify under any of these conditions, ask us how to apply to the Canada Revenue Agency for an exemption on your behalf.

How do I withdraw funds as an AIP?

If you would like to withdraw funds from your RESP as an Accumulated Income Payment, you have two options:

Option 1: Withdraw the AIP as income

When you withdraw an AIP, it becomes taxable income that you’ll need to declare on your income tax return for the year that you make the withdrawal.  It’s important to know that AIPs are taxable and must be included on your income tax return in the year the funds are received. AIPs are also subject to an additional 20% withholding tax, which means that we are required by the Canada Revenue Agency (CRA) to remit a portion of the interest earned when you make the withdrawal.

To withdraw AIP as income:

1. Complete the Request for Accumulated Income Payment form (ensure all subscribers to your RESP sign the form)
2. Mail the completed form to Embark

Option 2: Transfer the AIP directly to your RRSP

You can reduce the amount of tax you need to pay with an AIP-to-RRSP Transfer. You can contribute up to $50,000 directly to your RRSP (or a spousal RRSP), provided you have enough unused RRSP contribution room.

To transfer an AIP into your RRSP:

1. Complete the Request for Accumulated Income Payment form (ensure all subscribers to your RESP sign the form)
2. Complete the Tax Withholding Waiver on Accumulated Income Payments from RESPs (T1171) form (ensure all subscribers to your RESP sign the form)
3. Mail the completed forms to Embark