If you or your child is pursuing post-secondary education, then you may have heard of Educational Assistance Payments (EAPs). EAPs are payments made from a Registered Education Savings Plan (RESP) to a student to help cover their educational expenses. In this blog post, we’ll cover everything you need to know about EAPs and how they work.

What are Educational Assistance Payments (EAPs)?

EAPs are payments made from an RESP to a student who is enrolled in post-secondary education. These payments are intended to help cover the student’s education-related expenses, such as tuition fees, textbooks, and living expenses.

How do EAPs work?

To receive EAPs from an RESP, the student must be enrolled in a qualifying educational program. This includes full-time or part-time studies at a post-secondary institution, such as a college or university. The program must also be recognized by the Canada Revenue Agency (CRA) as eligible for EAPs.

EAPs are taxable income and must be reported on the student’s income tax return for the year in which they are received. The financial institution managing the RESP will issue a T4A slip to the student, which reports the amount of EAPs received during the year.

How much can be withdrawn as an EAP?

The amount that can be withdrawn as an EAP from an RESP is subject to a lifetime limit of $50,000 per beneficiary. The amount of the EAP is also subject to the terms of the RESP, as well as any government grants or bonds that have been contributed to the plan.

In general, the amount that can be withdrawn as an EAP is based on the beneficiary’s enrolment status and the cost of their education. The financial institution managing the RESP will typically require proof of enrolment and evidence of education-related expenses before releasing EAPs.

Can EAPs be used for any education-related expenses?

EAPs can be used for a wide range of education-related expenses, including tuition fees, textbooks, and living expenses. However, there are certain restrictions on how the funds can be used. For example, EAPs cannot be used to pay for transportation costs or other non-education related expenses.

It’s important to note that any unused EAPs cannot be carried forward to future years. If the beneficiary does not use the EAPs in the year they are received, they will be taxed on the funds and the RESP may be subject to penalties.

In conclusion, Educational Assistance Payments can be a valuable source of financial support for students pursuing post-secondary education. However, it’s important to understand the eligibility requirements, taxation rules, and limitations associated with EAPs. By doing so, you can make informed decisions about how to best use these funds to support your education goals.