What is a first home savings account?

How does the first home savings account work?

The FHSA is a registered savings account — an account with special tax status granted by the Government of Canada.

In the FHSA’s case, contributions to the account are tax deductible. That means you can reduce your taxable income for the year based on the amount you contribute. Reducing your net income can improve your annual tax return. It can also qualify you for additional government benefits like the Canada child benefit or the Groceries and Essentials Benefit.

There are also tax benefits when you withdraw funds from the FHSA. As long as the withdrawal is qualified, you won’t pay any taxes on it.¹ A qualified withdrawal means you’re using the funds to buy or build your first home.

We’ll take a closer look at what all that means. But first, how do you get started?

Opening a first home savings account

Eligibility criteria

The first step in opening an FHSA is making sure you’re eligible. You have to meet all of the following criteria at the time you open the account:

1. You’re at least the legal age for entering into a contract in your province (18 or 19).
2. You’re 71 or younger on December 31 of the year you open the account.
3. You’re a resident of Canada.
4. You didn’t live in a principal residence that you owned or jointly owned in the current calendar year or previous four calendar years.

You also have to meet one of the following criteria:

1. You didn’t live in a principal residence that your spouse or common-law partner owned or jointly owned in the current calendar year or previous four calendar years.
2. You don’t have a spouse or common-law partner at the time you open the account.²

Choosing a financial institution and account

If you meet the criteria, you can open your FHSA with any authorized financial institution, like a bank or credit union. Almost all major institutions offer FHSAs and may offer different types. The most common types of FHSAs are:

• Depositary accounts, which pay interest on your deposits (like a typical savings account).
• Self-directed accounts, which let you manage your own portfolio of investments inside the account.

If your savings are short-term and you want to set it and forget it, a depositary account is the way to go. If you’re comfortable investing and want your savings to have more opportunity to grow, a self-directed account may be better. Check with your financial institution as to which FHSA products they offer.

Setting up the account

Once you’ve chosen a provider and an account, setting it up is easy. All you’ll have to do is give the financial institution the info they need. That will likely include at least your:

• Social Insurance Number
• Date of birth
• Government-issued identification
• Proof of Canadian residency

When you file your income taxes for the year in which you open your FHSA, you’ll have to fill out Schedule 15 and include it with your tax return. You must do this even if you don’t actually contribute anything to the account.

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Contributing to your account

Once your account is open, you can start putting money in it.

Because of the tax benefits, FHSA contributions are limited. You can contribute up to $8,000 in the year you open your account, and another $8,000 each year after that. The maximum lifetime contribution is $40,000. If you don’t max out your limit in a given year, the remaining amount will carry forward into following years.

These limits apply even if you’ve opened multiple FHSAs. Your total contributions to all your accounts can’t surpass your regular limit.

Note that interest, dividends, or investment gains within the account don’t impact your limit — only funds that you actually transfer into the account do.³

You can also transfer funds from an RRSP into your FHSA. There are no immediate tax implications, however, and you still can’t exceed your FHSA’s contribution limits.

The deadline to contribute to your FHSA and realize tax benefits for the year is December 31. There’s no grace period to contribute for the previous year as there is for RRSPs.⁴

Overcontributing

If you contribute too much to your account and exceed your limit, you’ll have to pay a tax of 1% per month on the excess amount. You’ll pay this tax until you remove the excess from your account, or until your limit increases enough to cover the excess.

If your account holds an excess amount during the tax year, you’ll have to report it when you file your taxes by including Form RC728 and its accompanying Schedule A.

There are several options for removing the excess amount:

1. Make a designated withdrawal. You can withdraw up to (but not more than) your excess amount. You aren’t required to report this withdrawal as income.
2. Make a designated transfer to your RRSP or RRIF. Similarly, you don’t need to report this transfer as income.
3. Make a taxable withdrawal. You can always withdraw funds from your FHSA, but you’ll need to report them as income on your annual taxes.

To make a designated withdrawal or transfer, fill out Form RC727 and give it to the financial institution that holds the account.

If you overcontributed due to a reasonable error, you can request a waiver or cancellation of the tax on the excess amounts. For that, submit Form RC729 alongside whatever documentation you have of the error.

Withdrawing to buy a home

Obviously, the main purpose of the FHSA is to eventually withdraw the money and use it to buy a home. This is called a qualifying withdrawal, and funds withdrawn in this fashion are tax-free.

To make a qualifying withdrawal, you have to meet all of the following criteria:

• You’re a first-time home buyer (you haven’t lived in a home you owned or jointly owned in the current year or previous four years).
• You have a written agreement to buy or build a qualifying home. The purchase or construction must take place before October 1 of the year following the withdrawal.
• You can’t have acquired the home more than 30 days before the withdrawal.
• You’re a resident of Canada from the time of the withdrawal to the day you acquire the home.
• You intend to occupy the home as your principal residence within one year of acquiring it.¹

If you make a withdrawal without meeting these conditions, it will be considered a taxable withdrawal.

Once you’ve made a qualifying withdrawal, you can use the funds for your down payment, or for the various closing costs involved in the purchase process. That could even include your initial payment for home insurance, which your mortgage lender will require you to have before they release any funds.

To avoid possible tax complications, you should close your FHSA within the year following your first qualifying withdrawal.⁵

If you don’t buy a house

The FHSA has a maximum participation period — you can’t hold on to the account forever.

Your participation period begins when you open the account, and ends on December 31 of the year the earliest of the following occurs:

1. The year following the year you make your first qualifying withdrawal
2. The 15^th anniversary of opening the account
3. You turn 71

To avoid immediate tax consequences, you can transfer funds or investments in your FHSA to an RRSP or RRIF. You can also make a taxable withdrawal, but this amount will, of course, be taxed.

If you just leave everything in the account after the participation period ends, it will lose its special tax status, and you’ll have to declare the fair market value of everything in the account as income. Any future investment income will also be taxed.⁵

FHSA vs. Home Buyers’ Plan

The Home Buyers’ Plan allows first-time home buyers to withdraw funds from their RRSP to help pay for a qualifying home. Unlike the FHSA, RRSP withdrawals have to be repaid. A first-time home buyer may use both FHSA and RRSP funds for the same purchase, provided they meet the requirements at the time of each withdrawal.

The Home Buyers’ Plan can also be used to fund building a home on behalf of a specified disabled person. For that reason, it’s possible that one person could make use of it multiple times; there’s no lifetime maximum like the FHSA, though you do have to reduce your balance owing to zero before re-using the plan.

For someone buying their first home, here’s a quick comparison of the FHSA and the RRSP Home Buyers’ Plan:

	FHSA	RRSP Home Buyers’ Plan
Annual contribution limit	$8,000	18% of earned annual income, up to annual dollar limit
Maximum usable for home purchase	$40,000 lifetime	$60,000 per home
Tax deductible	Yes	Yes
Tax paid on qualifying withdrawals	None	None
Repayment required	No	Yes, over 15 years, starting fifth year after withdrawal year
Deadline to use money	Buy or build before Oct. 1 of the year after the withdrawal year	Buy or build before Oct. 1 of the year after the withdrawal year
If you don’t buy a home	Transfer funds to RRSP/RRIF (tax-deferred) or make taxable withdrawal	Money stays in RRSP

Commonly asked questions

Can you use the FHSA to purchase an investment property?

No. One of the conditions of making a qualifying withdrawal from the FHSA is that you intend to occupy the home as your principal residence. You can rent out a portion of that home, but its primary use must be as your own residence.

Technically, you can still use the FHSA to purchase a principal residence even if you already own an investment property as long as you didn’t live in that property previously.

What happens if you withdraw from the FHSA early?

If you withdraw funds from your FHSA without purchasing a home, it’s known as a taxable withdrawal. Anything you withdraw will count as taxable income for the year in which you make the transaction. Your financial institution will withhold the taxes directly from the amount you withdraw. You can claim this withholding tax as a credit toward your overall income tax for the year.¹

When was the FHSA introduced?

The FHSA launched on April 1, 2023.⁶

Sources

1. Canada Revenue Agency, “Withdrawals and Transfers Out of Your FHSAs,” canada.ca, 10 February 2026, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/withdrawals-transfers-out-your-fhsas.html.
2. Canada Revenue Agency, “Opening Your FHSAs,” canada.ca, 10 February 2026, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/opening-your-fhsas.html.
3. Canada Revenue Agency, “Participating in Your FHSAs,” canada.ca, 2 February 2026, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/contributing-your-fhsa.html.
4. Canada Revenue Agency, “Tax Deductions for FHSA Contributions,” canada.ca, 15 April 2026, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/tax-deductions-fhsa-contributions.html.
5. Canada Revenue Agency, “Closing Your FHSAs,” canada.ca, 2 February 2026, www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/closing-your-fhsa.html.
6. Alberta Securities Commission, “First Home Savings Account,” checkfirst.ca, accessed 9 July 2026, https://www.checkfirst.ca/how-to-invest/types-of-investment-accounts/first-home-savings-account/.

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