Can You Transfer an RESP to an RRSP in Canada? The AIP Rollover Explained

When no child is going to use an RESP, the investment income inside it can’t be paid out as Educational Assistance Payments. Instead it comes to the subscriber as an accumulated income payment (AIP), which carries an extra tax on top of regular income tax. Rolling the AIP into your RRSP avoids that extra tax, up to a lifetime limit. (If the beneficiary has a disability and an RDSP, the plan’s income can instead be rolled into the RDSP, under separate rules.) This page covers what an AIP is, when one can be paid, and how the RRSP rollover works. The other choices when a child skips school (waiting, a sibling, closing the plan) are compared in what happens if your child doesn’t go to university, and the RESP hub lists every other guide.

What an AIP is

When the plan closes without being used for school, each part is handled differently:

The grant repayment happens between the provider and the government; the subscriber doesn’t receive or report it.

When an AIP can be paid

In a family plan, the age condition applies to every beneficiary, so a younger sibling still under 21 delays an AIP. A plan that is too young can simply stay open until it qualifies: nothing is lost by waiting, and the income keeps growing.

The tax on an AIP

An AIP is taxed twice:

• as ordinary income of the subscriber, at their marginal rate; and
• with an additional tax of 20%. For residents of Quebec, the federal additional tax is 12%; Revenu Québec sets its own rules for the provincial side.

The RRSP rollover

The additional tax can be avoided on up to $50,000 of AIPs over the subscriber’s lifetime, across all their RESPs, if:

• the subscriber is the plan’s original subscriber (or took over the rights on a marriage breakdown, or as a public primary caregiver);
• they contribute the AIP to their own RRSP, or their spouse’s or common-law partner’s RRSP (a PRPP or SPP also qualifies), in the year the AIP is received or the first 60 days of the next year; and
• they have enough unused RRSP deduction room for the contribution.

The contribution uses ordinary RRSP room. The AIP is included in income, and the RRSP deduction offsets it, so the rolled-over amount is taxed only when it is eventually withdrawn from the RRSP. Your current room is on your latest notice of assessment; our RRSP contribution limit guide explains how it builds, and spousal RRSPs covers the spousal option.

The provider can be asked to send the AIP straight to an RRSP (Form T1171), so the subscriber never receives the cash and no tax is withheld.

Example: rolling over compared with taking cash

Assume a $40,000 AIP and a subscriber with a 43% marginal tax rate outside Quebec.

The rollover doesn’t make the money tax-free: it moves the tax to the year of the RRSP withdrawal, at the rate that applies then, and removes the additional tax entirely.

When the AIP is larger than your room or the limit

The part of an AIP that isn’t rolled over bears the full additional tax. Some ways families reduce it:

• Two subscribers, two limits. A spousal RRSP doesn’t add room: the contribution is deducted against the subscriber’s own RRSP deduction limit. When a plan has two subscribers, though, the AIPs are paid to each of them separately, and each can roll their share into an RRSP against their own deduction limit and their own $50,000 lifetime maximum.
• Time the payment. If room will grow (for example, after another year of earned income), waiting before requesting the AIP lets more of it be rolled over, as long as the plan isn’t in its final year. The AIP can’t be spread over several years, since the plan has to be closed by the end of February of the year after the first AIP is paid.
• Check first whether a sibling could use the plan. Naming a brother or sister under 21 keeps both the grants and the growth for education; the rules are in changing an RESP beneficiary.

Steps

1. Confirm the plan meets one of the AIP conditions above.
2. Check your RRSP deduction limit on your latest notice of assessment or in your CRA account.
3. Ask the provider for an AIP and whether it can be paid directly to your RRSP.
4. Report the AIP from your T4A, claim the RRSP deduction on your return for that year, and work out the additional tax on Form T1172, which subtracts the amount rolled into the RRSP; the provider’s paperwork shows how much was transferred.