The First Home Savings Account (FHSA) was first introduced to the Canadian public on April 1, 2023 – aimed towards helping non-homeowners save for their first home purchase. It combines the best features of an RRSP (tax-deductible contributions) and a TFSA (tax-free growth and withdrawals), making it one of the most powerful savings tools available to Canadians entering the housing market.
Who Can Open An FHSA?
To open a FHSA, you must:
- Be a Canadian resident;
- Be at least 18 years old (19 in some provinces) and not older than 71 at the end of the year you open the account; and
- Be a first-time home buyer. This means you have not lived in a home in the current year or previous four calendar years that you or your spouse/common-law partner owned.
Note: Owning a rental property does not necessarily prevent you from opening a FHSA. As long as you meet the first-time home buyer criteria, you may still be eligible.
How Long Can An FHSA Remain Open?
A FHSA must be closed by the earliest of the following:
- 15 years after the account was opened;
- December 31 of the year you turn 71; or
- The year you make your first qualifying withdrawal to buy a home.
What is the FHSA contribution room for 2025?
Each year, you can contribute up to $8,000 to your FHSA with a lifetime contribution limit of $40,000.
The annual limit for 2025 is therefore $8,000 (excluding any carry forward room from previous years).
Does FHSA Contribution Room Carry Forward?
If you do not contribute the full $8,000 in any given year, you can carry forward up to $8,000 of unused room FOR future years.
Example 1: In April 2024, Sophie opened her first FHSA. Her FHSA contribution room in 2024 is $8,000. Sophie contributes $2,000 in 2024. She therefore carries forward $6,000 from 2024, giving her $14,000 of room in 2025.
Example 2: Miles opens a FHSA in 2024 but contributes nothing until 2030. His carry-forward is capped at $8,000, so in 2030 his total room is $16,000 ($8,000 from prior years + $8,000 for 2030).
FHSA Tax Benefits
Contributions to a FHSA are tax-deductible, which reduces your taxable income — just like a RRSP. Like a RRSP, you can also choose when to claim your deduction, deferring it to a year when your income is higher to maximize tax savings.
You can estimate your tax refund from a FHSA contribution using our Tax Refund Calculator.
Like a TFSA, investment growth inside of a FHSA is tax-free, provided any withdrawals are used for a qualifying home purchase.
The combination of tax-deductible contributions, tax-free growth and tax-free withdrawals makes the FHSA a very powerful tool for first-time home buyers.
FHSA qualifying withdrawal
For a FHSA withdrawal to qualify as a tax-free withdrawal, the following conditions must be met:
- Must be a first-time home buyer for the purposes of making a withdrawal. This means you did not live in a home in the current year or previous four calendar years that you owned or jointly owned (except the 30 days before the withdrawal);
- Need a written agreement to buy or build a qualifying home, with the closing or completion date before October 1 of the following year;
- Cannot have bought the home more than 30 days before making the withdrawal;
- Must intend to live in the home as your principal residence within one year of purchase or construction; and
- Must complete and submit Form RC725 to your FHSA issuer (the institution holding your account).
Note: There is a very important distinction between being considered a first-time home buyer when opening an FHSA versus when withdrawing from it.
- To open a FHSA, neither you nor your spouse/common-law partner can have owned and lived in a home in the past four years.
- For withdrawals, the rule only applies to you personally. This means you may still qualify for a tax-free withdrawal even if your spouse or partner owns the home you currently live in.
Example: Jordan opened a FHSA in 2023 while renting an apartment and qualified as a first-time homebuyer. In 2024, she moved in with her partner, who owns a townhouse, and they become common-law a year later. Since she has already opened a FHSA, Jordan can still contribute up to the annual and lifetime FHSA limits. If she and her partner later decided to buy a different home, this can still qualify as her own first home, allowing her to make a tax-free withdrawal — even though she has been living in her partner’s home.
Had Jordan not opened a FHSA before becoming common-law and living in her partner’s home, she would have no longer been eligible to open an FHSA.
Can You Withdraw From Your FHSA Without Buying A House?
Yes — but how it is treated from a tax standpoint depends on what you do with the money.
Non-qualifying withdrawal (cash out)
Any non-qualifying withdrawal from a FHSA is treated as taxable income in the year you take it out.
- Withholding tax is applied at source by your financial institution;
- The amount withdrawn is reported on a T4FHSA slip and added to your income for that year; and
- If your marginal tax rate is higher than the withholding rate, you may owe additional tax. If it is lower, you may receive a refund.
Withholding tax rates (excl. Quebec) are as follows:
- $0 to $5,000 = 10%
- $5,000 to $15,000 = 20%
- $15,000 and over = 30%
Transfer to an RRSP or RRIF
Instead of withdrawing the money as cash, you can transfer FHSA funds tax-deferred into your RRSP or RRIF (without using RRSP contribution room).
- You can keep some of the tax benefits without ever buying a home;
- Withdrawals from your RRSP/RRIF will eventually be taxable, but you have effectively created extra RRSP room for free;
- It must be a direct transfer from you FHSA to your RRSP/RRIF; and
- You must complete and submit Form RC721 to your FHSA issuer.
Note: Even if you never plan to purchase a home, opening and contributing to an FHSA is still valuable. It offers tax deductions and effectively creates up to $40,000 of “free” RRSP room.
Example: Taylor contributes the maximum $8,000 each year from 2024 to 2028 (total contributions = $40,000). By 2028, the account has grown to $46,000. Taylor decides not to buy a home and to transfer the full $46,000 to her RRSP. She already has an RRSP and it is fully contributed.
- There is no tax at transfer and no existing RRSP room is used. Her RRSP is now $46,000 larger.
- When Taylor eventually withdraws from her RRSP/RRIF in retirement, the full $46,000 (including the $6,000 of growth earned in the FHSA) will be taxable as income.
Can You Fund an FHSA with Your RRSP?
Yes, funds can be transferred directly from your RRSP into a FHSA. This can be a smart way to take advantage of tax-free growth and tax-free withdrawals for a home purchase, without using new cash. Note the following key points:
- Non-Taxable Transfer – Moving money from an RRSP to a FHSA does not trigger tax at the time of transfer, provided it is a direct transfer between accounts.
- No Double Deduction – Because you already claimed a deduction when contributing to your RRSP, you cannot claim a deduction again for the transferred amount when it goes into your FHSA.
- FHSA Contribution Room Still Applies – The amount transferred counts against your annual and lifetime FHSA contribution limits.
- Loss of RRSP Contribution Room – When you transfer funds from your RRSP to your FHSA it does not restore RRSP room for the amount transferred.
- No Repayment Requirement – Unlike the Home Buyer’s Plan (HBP), there is no repayment requirement to your RRSP for the funds that were transferred.
Note: If possible, it is typically better to fund a FHSA using external cash rather than doing a RRSP transfer since you lose that RRSP contribution room. However, if external cash is not available and you are looking at buying a home, an RRSP to FHSA transfer can be an effective way to get funds out of your RRSP to use for a home purchase without any tax on the withdrawal.
Home Buyers' Plan (HBP) vs FHSA
Both the First Home Savings Account (FHSA) and the Home Buyers’ Plan (HBP) let you use registered savings toward a first home. They share the same goal but work very differently.
Home Buyers’ Plan (HBP)
- Allows you to withdraw up to $35,000 from your RRSP to buy a first home;
- Withdrawals are not taxed, provided you repay the amount to your RRSP over 15 years;
- Each year, you must repay at least 1/15 of the borrowed amount; otherwise, the unpaid portion is added to your taxable income; and
- Does not provide new RRSP contribution room.
First Home Savings Account (FHSA)
- Lets you contribute up to $8,000 per year (lifetime max $40,000) with a tax deduction;
- Growth and withdrawals are tax-free if used for a qualifying withdrawal;
- Withdrawals do not need to be repaid; and
- If you do not buy a home, you can transfer FHSA funds to your RRSP or RRIF without affecting your RRSP contribution room.
| Feature | HBP | FHSA |
|---|---|---|
| Source of funds | RRSP | New contributions or RRSP transfer |
| Contribution limit | Based on RRSP room | $8,000/year, $40,000 lifetime |
| Withdrawal limit | $35,000 | Full FHSA balance |
| Tax treatment of withdrawal | Tax-free if for a qualifying home and withdrawal is repaid | Tax-free if for a qualifying home |
| Repayment required? | Yes – over 15 years | No |
| Effect on RRSP room | No new RRSP room created. Repayments restore original RRSP balance. | Transfers do not restore RRSP room, but unused FHSA can roll into RRSP/RRIF |
What Happens To Your FHSA If You Pass Away?
The First Home Savings Account does allow you to name a successor holder or a beneficiary, similar to a TFSA or RRSP, but the rules are narrower. If you die with a FHSA, what happens depends on who your beneficiary or successor holder is.
If your spouse or common-law partner is the successor holder:
- They can take over your FHSA tax-free and keep it as their own, if they qualify to open one; or
- If they do not qualify to open a FHSA, they can still transfer the money tax-deferred into their RRSP or RRIF.
- They can take it as a lump-sum payment (which is taxable).
If your spouse or common-law partner is a beneficiary (but not a successor holder):
- They can receive the funds tax-deferred by transferring them to their RRSP/RRIF; or
- They can take it as a lump-sum payment (which is taxable).
If the beneficiary is someone else (not your spouse/common-law partner):
- The fair market value of the FHSA is taxable income to them in the year they receive it; and
- Withholding tax will apply before payment.
If your estate is the beneficiary
- The FHSA’s value is included in the estate’s income and taxed before distributing what is left to heirs.
Extra rule — “Exempt period”
- After death, there is a short window (until Dec 31 of the year after your death) where distributions can be handled without penalties.
- The FHSA must be closed by the end of this period, or it loses FHSA status and everything left becomes taxable.
What Happens If You Over-Contribute to Your FHSA?
If you over-contribute to your First Home Savings Account, the CRA treats it like over-contributing to an RRSP or TFSA — there is a monthly penalty tax until the excess is removed.
You pay 1% per month on the highest excess FHSA amount for that month. For example, if you are $2,000 over the limit during the month, you owe $20 per month until it is resolved.
An over-contribution can be resolved a few ways:
- If you create new contribution room the following year (e.g., new $8,000 limit in January), part or all of the excess can be absorbed depending on how much the over-contribution is.
- You can withdraw the over-contribution amount to stop the penalty. The withdrawal may be taxable if you previously deducted the over-contribution from your taxes.
- You can transfer the over-contribution amount to an RRSP if you have RRSP space available.
Are There Tax Slips Issued For An FHSA?
Any movement of funds into or out of your FHSA will trigger a T4FHSA by the institution that is holding your account. This includes:
- Contributions to a FHSA
- Transfers from a RRSP into a FHSA
- A qualifying withdrawal (buying your first home)
- A non-qualifying withdrawal
- A direct transfer to your RRSP or RRIF
Summary - FHSA vs TFSA vs RRSP
The FHSA is an account we have become very familiar with since its inception in 2023. For anyone looking to purchase their first home, this account should be considered first and foremost since it combines the best aspects of both a RRSP and a TFSA.
- Like a RRSP, contributions are tax-deductible, reducing your taxable income today.
- Like a TFSA, qualifying withdrawals (for a first home) are tax-free, including both initial contributions and investment growth.
- A FHSA can be transferred to a RRSP, even if your RRSP is fully contributed, effectively creating “free” RRSP space and preserving tax deferral for retirement. This makes it at least on par with RRSP contributions even if you have no intention of buying a home in the future.
| Feature | FHSA | RRSP | TFSA |
|---|---|---|---|
| Primary objective | Saving for a first home purchase. | Saving for retirement. Optional HBP for first home purchase. | Flexible, tax-free saving for various goals. |
| Contribution limit | $8,000/year $40,000 lifetime |
18% of prior year’s income (up to annual max) | Varies annually – $7,000 (2025) Lifetime of $102,000 (age dependent) |
| Contributions tax-deductible | Yes | Yes | No |
| Carry-forward of unused room | Yes; up to $8,000 can carry forward (only after the FHSA is opened). | Yes; unused RRSP room carries forward indefinitely. | Yes; unused TFSA room accumulates indefinitely. |
| Growth inside account | Tax-free if qualifying home purchase. Tax-deferred if transferred to RRSP. | Tax-deferred | Tax-free |
| Withdrawal for home | Tax-free if qualifying home purchase. | HBP: withdraw up to $35k tax-free (must repay). | Tax-free (no deduction benefit). |
| Other withdrawals | Taxable | Taxable | Tax-free |
| Recontributions after withdrawals | No | No | Yes – In the following year |
| Repayment required? | No | HBP withdrawals: Yes (15 years) | No |
| Conversion | Can roll into RRSP/RRIF (no impact on RRSP room) |
Becomes RRIF by age 71 | None |
| Overcontribution penalties | 1% per month on excess. | 1% per month on excess over the $2,000 buffer. | 1% per month on excess. |
| Contribution deadline | Calendar year (deduction can be claimed now or carried forward). | First 60 days of following year count for prior tax year. | Calendar year. |