How an RESP works

The promoter usually pays the contributions to the beneficiaries. Income earned on the contributions is paid to the beneficiaries in the form of educational assistance payments (EAPs). Beneficiaries include the EAPs, but not the contributions, in their income for the year in which they receive them from the RESP.

Subscribers cannot deduct their contributions from their income on their return. If not paid out to the beneficiary, the contributions are usually paid by the promoter to the subscriber at the end of the contract. Subscribers do not usually have to include the contributions in their income when they get them back.

The diagram below gives an overview of how an RESP generally works.