If you’re buying your first home, the First Home Savings Account (FHSA) is the single most powerful tax tool available in Canada right now. Used properly, it can shave years off your savings timeline — and you can stack it with the RRSP Home Buyers’ Plan (HBP) for even more buying power.

Below is a clear, up-to-date walkthrough of how the FHSA works in 2025, who qualifies, how much you can put in, how to make tax-free withdrawals, and battle-tested strategies I use with clients (over $150M+ funded) to get them into a home sooner.

What is the FHSA (in plain English)?

The FHSA is a registered account that lets eligible first-time buyers save for a down payment. You get an income-tax deduction for contributions (like an RRSP), and your growth/withdrawals are tax-free when used for a qualifying first home (like a TFSA). Annual participation room is $8,000 in the first year you open it.

Key limits (2025):

• Annual: $8,000 of participation room in the first year you open an FHSA (and then calculated annually).

• Lifetime: $40,000 maximum that can go into FHSAs across your lifetime.

Who’s eligible to open one?

You must be a resident of Canada, at least the age of majority in your province (18 or 19), under 72 in the year you open it, and meet the first-time home buyer rule: you didn’t live in a home you owned (or would be a qualifying home) in the year you open the FHSA or in the previous four calendar years. There’s also a spousal/common-law test at opening.

Contributions, carryforward & deductions (how the numbers really work)

• In the first year you open your FHSA, your participation room is $8,000 total — this cap applies to both your direct contributions and RRSP-to-FHSA transfers combined.

• Carryforward: unused participation room can carry forward, subject to CRA’s rules (in subsequent years the carryforward added to new room is capped and calculated using CRA’s “participation room carryforward” formula). Practically, this lets you catch up next year if you couldn’t put in the full amount.

• Tax deduction timing: like RRSPs, you can claim FHSA contributions this year or a future year to optimize your tax bracket; CRA tracks unused FHSA contributions on your Notice of Assessment (Schedule 15 required the year you open). Note: contributions made in the first 60 days of the year cannot be back-dated to the prior year (unlike RRSPs).

Over-contributing? CRA charges 1% per month on the excess until you fix it.

Transfers in (RRSP) and what’s not allowed

• You can directly transfer from RRSP → FHSA (no immediate tax) using CRA Form RC720, within your available FHSA participation room. Transfers don’t create a deduction (only new contributions do).

• You cannot transfer directly from a TFSA (or RESP/RRIF/RPP/etc.) into an FHSA. If you want to “move” TFSA money, you must withdraw from the TFSA and contribute to the FHSA (watch both sets of rules).

What counts as a qualifying withdrawal (tax-free)?

You can pull all your FHSA funds out, tax-free, if you meet every condition below:

1. You meet the first-time home buyer test at withdrawal (note: the definition for withdrawals is slightly different from the “opening” test).

2. You have a written agreement to buy/build a qualifying home in Canada, with closing/occupancy before Oct 1 of the year after your withdrawal.

3. You haven’t acquired the property more than 30 days before the withdrawal.

4. You’re a Canadian resident from withdrawal until you acquire the home (or you pass away).

5. You intend to live in the home as your principal residence within one year.

6. You file CRA Form RC725 with your issuer.

Stacking with HBP: You can use FHSA and HBP together on the same home (if you meet each program’s rules). In 2025, the HBP limit is $60,000 for withdrawals made after Apr 16, 2024, and there is temporary repayment relief for some 2022–2025 first withdrawals.

When do you have to close the FHSA?

Your FHSA “maximum participation period” ends on the earliest of:

• 15 years after opening your first FHSA,

• Dec 31 of the year you turn 71, or

• Dec 31 of the year after your first qualifying withdrawal.
  Before that date, either use it, or transfer the remaining FHSA balance to your RRSP/RRIF tax-free (no RRSP room needed), or you’ll face tax on the remaining fair market value.

Strategy Playbooks (what I advise clients to do)

1) “Max & Match” (fastest save, biggest deduction)

• Open the FHSA now (that’s what starts your room).

• Contribute $8,000/year until you hit $40,000; invest it appropriately for your timeline.

• Pair with HBP ($60k) if you have RRSP room to boost your down payment, then design a repayment plan for HBP while keeping your FHSA withdrawals repayment-free.

2) “Tax-Bracket Optimizer”

• Contribute to FHSA but time the deduction for a higher-income year to maximize your refund (CRA lets you carry forward unused FHSA deductions).

3) “RRSP → FHSA Bridge”

• Use a direct RRSP transfer (no new deduction, but it fills FHSA room so future withdrawal becomes tax-free with no HBP repayment). Great if your RRSP grew but you want tax-free home funds.

4) Couple’s “Double Barrel”

• Each partner opens and funds their own FHSA. If both meet withdrawal conditions, you can both make tax-free FHSA withdrawals for the same home. Stack with each person’s HBP where eligible.

5) “Didn’t Buy? No Problem.”

• If life changes and you don’t buy within the period, transfer FHSA → RRSP/RRIF tax-free before the deadline so the savings stay sheltered — you don’t lose the tax benefits.

Frequently Asked Questions

Can I open more than one FHSA?
Yes — but your annual participation room applies across all FHSAs combined.

Can I invest inside my FHSA (not just cash)?
Yes. Depending on the account type (depositary, trusteed, or insured), FHSAs can hold GICs, bonds, mutual funds, ETFs and listed securities (subject to CRA’s qualified investment rules).

What if I over-contribute?
There’s a 1% per month tax on the highest excess for each month until fixed, and forms to file with CRA. Canada.ca

Is there a quick way to estimate my potential FHSA savings?
CRA now publishes FHSA estimators and tracks your participation room on your Notice of Assessment after you file Schedule 15 in the year you open your first FHSA.

How is the “first-time buyer” test different at opening vs. withdrawal?
At opening, CRA also tests whether your spouse/common-law partner owned the home you lived in during the four-year lookback; at withdrawal, the test is based on you, with a specific definition and timing.

2025 extras to pair with your FHSA

• HBP now $60,000 per person (for withdrawals after Apr 16, 2024) and temporary repayment deferral applies to many 2022–2025 first withdrawals. If you’re saving aggressively, this is a big lever.

• 30-year amortization is permitted for some first-time buyers of newly built homes (policy began Aug 1, 2024). That can lower payments — useful when combining with FHSA/HBP.

Final word

The FHSA is designed to supercharge a first-time buyer’s down payment. When you coordinate FHSA + HBP + smart investing + lender strategy, you give yourself more options and a smoother path to the keys.

Want a custom plan (how much to put in FHSA vs. RRSP/TFSA, and how to structure your mortgage pre-approval)? I’ll run the numbers for your situation and map the fastest route.

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