First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a registered savings plan introduced by the Canadian government to help eligible first-time home buyers save for their first home. It combines the benefits of an RRSP and a Tax-Free Savings Account (TFSA) by allowing qualifying contributions to be deducted from income while investment growth remains tax-free.

Eligible individuals can save up to $40,000 in an FHSA to purchase or build a qualifying first home in Canada.

What Is a First Home Savings Account (FHSA)?

An FHSA is a registered account designed specifically for first-time home buyers. Contributions made to an FHSA may be claimed as a tax deduction, and qualifying withdrawals used to purchase a first home are not taxable.

The main benefits of an FHSA include:

• Tax deductions: Eligible FHSA contributions can reduce taxable income.
• Tax-free growth: Investment income earned inside the FHSA is not taxed.
• Tax-free withdrawals: Qualifying withdrawals for a first home are not included in income.

Who Can Open an FHSA?

To open a First Home Savings Account, an individual must meet the following conditions:

• Be at least 18 years old and under 72 years old at the end of the year.
• Be a resident of Canada for tax purposes.
• Be considered a first-time home buyer.

An individual is generally considered a first-time home buyer if they did not live in a qualifying home that they owned or that their spouse or common-law partner owned during the current year or the previous four calendar years.

FHSA Contribution Limits

Contribution Type	Limit
Annual FHSA contribution limit	$8,000
Lifetime FHSA contribution limit	$40,000
Maximum contribution in one year (with carry-forward room)	$16,000

When an individual opens their first FHSA, they must complete Schedule 15 – FHSA Contributions, Transfers and Activities with their tax return for that year, even if no contributions or transfers were made.

FHSA Contribution Deductions

Eligible FHSA contributions can be claimed as deductions on the taxpayer's income tax return.

For example, if Rose opens an FHSA in 2025 and contributes $6,000, she may claim an FHSA deduction of up to $6,000 on her 2025 tax return.

Her unused FHSA contribution room can be carried forward to future years, subject to CRA limits.

FHSA Carry-Forward Rules

Unused FHSA contribution room can be carried forward, but only up to a maximum of $8,000 into the following year.

Example:

If Jane contributes only $2,000 in 2025:

• $6,000 of unused contribution room carries forward.
• In 2026, she may contribute up to $14,000 ($8,000 annual limit + $6,000 carry-forward).

Qualifying FHSA Withdrawals

FHSA withdrawals can be made tax-free if they meet CRA qualifying withdrawal requirements.

The individual must:

• Be a first-time home buyer at the time of withdrawal.
• Have a written agreement to buy or build a qualifying home before October 1 of the year following the withdrawal year.
• Purchase a qualifying residential unit located in Canada.

A qualifying home may include certain cooperative housing units where the individual has an equity interest. A cooperative unit providing only tenancy rights does not qualify.

How to Request a Qualifying Withdrawal

To make a qualifying FHSA withdrawal, the taxpayer must complete:

Form RC725 – Request to Make a Qualifying Withdrawal from your FHSA

The completed form must be provided to the FHSA issuer.

Non-Qualifying FHSA Withdrawals

Withdrawals that do not meet FHSA qualifying conditions are taxable.

For non-qualifying withdrawals:

• The withdrawal amount is included in income.
• The financial institution must withhold tax.
• A T4FHSA slip will generally be issued.

Excess FHSA Contributions

If an individual contributes more than their available FHSA contribution room, CRA considers the excess amount subject to tax.

A tax of 1% per month applies on the highest excess FHSA amount for that month until the excess amount is removed or additional contribution room becomes available.

Transferring RRSP Funds to an FHSA

Individuals may transfer funds directly from an RRSP to an FHSA by completing:

Form RC720 – Transfer from your RRSP to your FHSA

Important rules:

• RRSP-to-FHSA transfers reduce available FHSA contribution room.
• The transfer does not restore RRSP contribution room.
• RRSP transfers to an FHSA are not deductible.

Transfers Between FHSAs

Individuals can transfer funds directly between their own FHSAs by completing:

Form RC721 – Transfer from one FHSA to another FHSA, RRSP, or RRIF

A direct FHSA-to-FHSA transfer:

• Does not reduce FHSA contribution room.
• Is not considered a new contribution.

However, if an individual withdraws funds from one FHSA and deposits them into another FHSA themselves, it is treated as a new contribution and may create excess contribution issues.

FHSA for Non-Residents

Individuals who become non-residents after opening an FHSA may still be able to contribute in certain situations. However, they cannot make qualifying home withdrawals while they are non-residents.

Tax Slips Related to FHSA

Financial institutions issue a T4FHSA slip when an individual contributes to or withdraws funds from an FHSA.

Final Thoughts

The First Home Savings Account provides an excellent opportunity for eligible Canadians to save for their first home while receiving valuable tax benefits. Understanding FHSA contribution limits, withdrawal rules, transfer options, and reporting requirements can help taxpayers maximize their savings and avoid costly mistakes.