FHSA Withdrawal Rules
The First Home Savings Account (FHSA) allows tax-free withdrawals to purchase your first home. Here’s how it works:
Qualifying Withdrawal Requirements
To make a tax-free qualifying withdrawal:
| Requirement | Details |
|---|---|
| First-time buyer | Not owned a home you lived in during current year or 4 preceding years |
| Canadian resident | Must be resident when withdrawing |
| Written agreement | Signed agreement to buy or build qualifying home |
| Home location | Must be in Canada |
| Principal residence | Intent to occupy within 1 year |
| Timeline | Occupy home by October 1 of year after withdrawal |
First-Time Buyer Definition
You qualify as a first-time buyer if:
| Scenario | Qualifies? |
|---|---|
| Never owned a home | ✓ Yes |
| Owned 5+ years ago (lived in it) | ✓ Yes |
| Owned investment property (never lived in it) | ✓ Yes |
| Spouse owned 5+ years ago | ✓ Yes |
| Owned 3 years ago | ✗ No |
| Spouse currently owns | ✗ No |
Key: You and your spouse/common-law partner must both be first-time buyers.
Withdrawal Process
Step 1: Sign a Purchase Agreement
Before withdrawing, you need a written agreement to buy or build a qualifying home.
Step 2: Request Withdrawal
- Complete Form RC725 (Request to Make a Qualifying Withdrawal from your FHSA)
- Submit to your FHSA issuer (financial institution)
- Funds released to you tax-free
Step 3: Buy and Occupy the Home
- Complete the purchase
- Move in within 1 year of purchase
- Must occupy as principal residence by October 1 of year following withdrawal
Timelines
| Event | Deadline |
|---|---|
| Withdrawal | Before or within 30 days after closing |
| Purchase closing | Within 30 days after first withdrawal |
| Occupy as principal residence | By October 1 of year after withdrawal |
| FHSA account closure | After all funds withdrawn/transferred |
Partial Withdrawals
You can make multiple qualifying withdrawals over time:
| Withdrawal | Amount | Running Total |
|---|---|---|
| March 2026 | $20,000 | $20,000 |
| June 2026 | $15,000 | $35,000 |
| August 2026 | $5,000 | $40,000 |
All withdrawals must meet the qualifying requirements.
Non-Qualifying Withdrawals
If you withdraw without meeting the requirements:
| Type | Tax Treatment |
|---|---|
| Qualifying withdrawal | Tax-free |
| Non-qualifying withdrawal | Taxable as income |
Example
| Scenario | $40,000 Withdrawal |
|---|---|
| Qualifying (first home) | $0 tax |
| Non-qualifying (40% bracket) | $16,000 tax |
Avoid non-qualifying withdrawals — you lose the tax benefit.
What If I Don’t Buy a Home?
If you don’t make a qualifying withdrawal, you have options:
Option 1: Transfer to RRSP/RRIF (Tax-Free)
- No tax on transfer
- No RRSP room required
- Taxed when eventually withdrawn from RRSP/RRIF
| FHSA Balance | Transfer to RRSP | Tax Now | Tax Later |
|---|---|---|---|
| $40,000 | $40,000 | $0 | On withdrawal |
Option 2: Withdraw as Taxable Income
- Full amount taxable
- Added to your income for the year
- Not recommended if avoidable
| FHSA Balance | Withdrawal | Tax (40% bracket) |
|---|---|---|
| $40,000 | $40,000 | $16,000 |
Account Closure Deadline
Must close FHSA by the earliest of:
- December 31 of the 15th year after opening
- December 31 of year you turn 71
- December 31 of year following first qualifying withdrawal
FHSA vs Home Buyers’ Plan (HBP)
| Feature | FHSA | HBP (RRSP) |
|---|---|---|
| Max withdrawal | $40,000 | $60,000 |
| Repayment required | No | Yes (15 years) |
| Tax on withdrawal | Tax-free | Tax-free |
| Can use both | Yes | Yes |
| Total combined | $100,000 | (per person) |
Using Both FHSA and HBP
You can withdraw from both:
| Source | Amount |
|---|---|
| FHSA | $40,000 |
| HBP | $60,000 |
| Total | $100,000 |
For couples, that’s up to $200,000 combined.
Common Questions
Can I use FHSA for a down payment?
Yes. Most home buyers use FHSA withdrawals for their down payment and closing costs.
Can I buy with someone who isn’t a first-time buyer?
Yes, but only you can make the FHSA withdrawal. Your co-buyer doesn’t need to be a first-time buyer.
What if I buy but don’t move in within 1 year?
The withdrawal may become non-qualifying. You’d owe tax plus potential penalties.
Can I buy a rental property?
No. The home must be intended as your principal residence. You can’t buy purely as an investment.
Can I buy a cottage?
Yes, if you intend to occupy it as your principal residence within 1 year.
What counts as a qualifying home?
- Single-family homes
- Condos
- Semi-detached houses
- Townhouses
- Duplexes (if you live in one unit)
- Mobile homes
- Shares in co-operative housing
Strategies for Maximum Benefit
Start Early
Open your FHSA as soon as possible to start the 15-year clock and accumulate room.
Max Contributions
Contribute the full $8,000/year to maximize tax deductions and growth.
Invest Aggressively (if time permits)
If you won’t buy for 5+ years, invest in growth assets. If buying soon, prioritize capital preservation.
Combine with HBP
Use both FHSA ($40,000) and HBP ($60,000) for up to $100,000 per person.