What Is an Accumulated Income Payment (AIP)?

The term "accumulated income payments (AIPs)" refers to funds withdrawn from a Canadian Registered Education Savings Plan (RESP) if the beneficiary decides not to attend college. In this case, the returns generated in the RESP aren't forfeited as long as the subscriber fulfills certain criteria.

How Accumulated Income Payments (AIPs) Work

A 澳洲幸运5官方开奖结果体彩网💝:Registered Edu𝓡cation Savings Plan (RESP) is the equivalent of a United States 529 plan. It allows savings for college to grow tax-free until the money is withdrawn, at which time taxes on 澳洲幸运5官方开奖结果体彩网:withdrawals tend to be low or nonexistent because students typically have little to no income. The majority of RESP acc🐼ount holders are parents, but in some cases grandparen⛦ts, guardians, or friends of the family can also set up an account.

As noted above, AIPs are amounts paid back to the subscriber of an RESP and include any money earned on the investment. Subscribers can make these withdrawals if the 澳洲幸运5官方开奖结果体彩网:beneficiary decides not to puꦬrsue post-secondary education or if there's no other suitable beneficiary named.

If taken as cash, AIPs are taxable income and are subject to the taxpayer's regular 澳洲幸运5官方开奖结果体彩网:income tax rate plus an additional federal penalty tax of 20%, or 12% in Quebec. The amount of money contributed to an RESP won't be taxed, just the interest earned or investment gains. Anyone who makes a withdrawal receives a T4A tax slip in order to report the income on their annual 澳洲幸运5官方开奖结果体彩网:tax return. The RESP must be terminated by the end of February of the following year once an AIP is made.

As much as $50,000 CAD of an AIP can be rolled into a 澳洲幸运5官方开奖结果体彩网:Registered Retirement Savings Pꦏlan 🌜(RRSP) or a spousal RRSP using , if there's sufficient room for additional contributions. Another option for avoiding the tax penalties is substituting another beneficiary, such as a younger sibling who plans to attend college.

To avoid the tax penalty and retain the full tax benefits of the savings, the sponsor can keep the RESP open for a certain period of time—up to 36 years. This helps﷽ if the beneficiary decides to attend college at a la🅰ter date.

Special Considerations

As mentioned above, if an RESP's beneficiary chooses not to go to an approved university, the plan subscriber doesn't have to forfeit any of the returns accumulated by the account provided one of the following criteria is met:

• The plan holder is a resident of Canada at the time of the withdrawal, the beneficiary is 21 years of age or older, and the RESP is at least 10 years old
• The plan is being closed by the end of its 35th year
• The beneficiary is deceased

澳洲幸运5官方开奖结果体彩网: The following aren't included in AIPs:

• Educational assistance payments (EAPs)
• Payments to a school within Canada
• Contribution refunds to the beneficiary or the RESP plan holder
• Any transfers to a different RESP
• Repayments under the Canada Education Savings Act or another provincial program

The Bottom Line

Not every child is college-bound. In this case, ꩲ🅰you may recoup your contributions to a Registered Education Savings Plan (RESP), with a slight penalty, via accumulated income payments (AIPs).