You opened an FHSA with every intention of buying a home — but life changed. Maybe you moved to a different city, prices kept climbing, or you simply decided renting suits you. Here is exactly what happens to your FHSA funds in every scenario.
The FHSA Deadline You Need to Know
Your FHSA must be closed by December 31 of the earlier of:
- The 15th year after the year you opened the account, or
- The year you turn 71
After that deadline, you cannot make a qualifying withdrawal or any further contributions — the account must be wound down.
| Scenario | Deadline |
|---|---|
| Opened FHSA in 2023 | Must close by Dec 31, 2038 (15 years) |
| Opened FHSA in 2026 | Must close by Dec 31, 2041 |
| Turn 71 before the 15-year mark | Dec 31 of your 71st birthday year takes priority |
Your Options When You Won’t Be Buying
You have three choices when your FHSA needs to close without a qualifying home purchase:
Option 1: Transfer to RRSP or RRIF (Almost Always Best)
You can transfer your entire FHSA balance — contributions plus all investment growth — to your RRSP or RRIF without using any RRSP contribution room.
| Feature | Details |
|---|---|
| Tax on transfer | None — fully tax-free transfer |
| RRSP room required | No — this is an exception to normal RRSP rules |
| Growth included | Yes — all gains transfer tax-free |
| Tax owed | Eventually, when you withdraw from RRSP in retirement |
| Age limit | Must transfer to RRIF if past age 71 |
This is effectively free bonus RRSP room — the federal government lets non-home-buying FHSA holders roll their savings into retirement without penalty.
Example: You opened an FHSA in 2023 and contributed $8,000/year for 10 years. Invested in ETFs, the account grew to $115,000. You decide not to buy in 2033. You transfer the entire $115,000 to your RRSP. You used no RRSP contribution room, and the $115,000 will be taxed when you withdraw it in retirement at a presumably lower rate.
Option 2: Withdraw as Cash (Taxable)
If you close your FHSA and withdraw the funds rather than transferring to an RRSP, the full amount withdrawn is taxable income.
| Feature | Details |
|---|---|
| Tax on withdrawal | Full amount added to income in the year of withdrawal |
| Withholding tax | Financial institution withholds tax at source |
| Prior deductions clawed back? | No — you keep your prior-year FHSA deductions |
| Investment growth taxed? | Yes — growth is included in the taxable amount |
This is generally the worst option unless you are in an extremely low tax bracket at the time of withdrawal.
What you owe on a $40,000 FHSA withdrawal at different income levels:
| Total Income That Year | Marginal Rate | Tax on $40,000 FHSA |
|---|---|---|
| Under $57,375 | ~26% (federal + provincial avg) | ~$10,400 |
| $57,375–$111,733 | ~33% | ~$13,200 |
| Over $111,733 | ~43% | ~$17,200 |
Option 3: Transfer to RRIF Directly
If you are 71 or older and cannot contribute to an RRSP, you can transfer your FHSA directly to a RRIF — same tax-free treatment as the RRSP transfer. Withdrawals from the RRIF are then taxable under normal RRIF minimum withdrawal rules.
What If You Change Your Mind Before the Deadline?
You have 15 years to make a qualifying withdrawal. You are not locked into your decision immediately when life circumstances change. The account stays open, contributions and growth continue to accumulate, and you can still buy a home at any point within the window.
| Timeline | What You Can Do |
|---|---|
| Within 15 years | Still make a qualifying withdrawal for a first home |
| Still within 15 years, circumstances changed | Transfer to RRSP, withdraw as cash, or continue holding |
| Deadline has passed | Must close — qualifying withdrawal no longer available |
Do You Lose the Tax Deductions You Already Claimed?
No. CRA does not claw back FHSA tax deductions if you ultimately do not buy a home. The deductions you claimed in prior years when you contributed are permanent.
This is a significant difference from some other tax programs. The only tax consequence of not buying is that the withdrawal (if you take it as cash) is taxable. The prior deductions are never reversed.
What If You Never Made a Qualifying Contribution?
If you opened an FHSA but never made a contributing, closing the account is straightforward — there are no funds to transfer or withdraw. The account simply closes with a zero balance.
What Happens to Unused Carry-Forward Room?
Unused carry-forward room disappears when your FHSA closes. Carry-forward room cannot be transferred to an RRSP like the balance can — it is simply lost. This is another reason to contribute as much as possible while your account is open.
Effect on Prior RRSP Contributions
Transferring your FHSA to your RRSP does not reduce your future RRSP contribution room. It is treated as a direct transfer — separate from the contribution room system. Your RRSP contribution room (based on 18% of earned income) remains intact.
Rare Scenario: Death Before Using the FHSA
If you die before making a qualifying withdrawal or closing the account:
| Beneficiary | Tax Treatment |
|---|---|
| Surviving spouse/CLP designated as successor | Receives account tax-free, can contribute to their own FHSA |
| Spouse not designated as successor | Balance included in estate income (taxed) |
| Non-spouse beneficiary | Balance included in deceased’s terminal tax return |
| No beneficiary named | Balance flows through estate, taxed accordingly |
Naming your spouse as successor holder (not just a beneficiary) is the optimal estate choice for FHSAs.
Tax Comparison: All Close-Out Options
| Option | Immediate Tax | Long-Term Tax | Flexibility |
|---|---|---|---|
| Transfer to RRSP | None | Taxed on RRSP withdrawal | Good |
| Transfer to RRIF | None | Taxed on RRIF minimums | Limited (must withdraw every year) |
| Withdraw as cash | Full income tax now | None | Lowest value |