An FHSA withdrawal is either a qualifying withdrawal, which is tax-free, or a taxable one. There's nothing in between. Which one you're making depends on whether you meet the CRA's conditions at the time you withdraw, not when you opened the account.
A qualifying withdrawal needs all of these
- You're a first-time home buyer at the time of the withdrawal.
- You have a written agreement to buy or build a qualifying home in Canada, entered into before October 1 of the year after the withdrawal.
- You intend to live in it as your principal residence within one year of buying or building it.
- You didn't acquire the home more than 30 days before the withdrawal.
- You're a resident of Canada from the withdrawal until you buy or build the home.
"First-time home buyer" at withdrawal
The test is the same one used when you opened the account, run again on the withdrawal date. You can't have lived in a home that you, or your spouse or common-law partner, owned or jointly owned as your principal residence at any time from January 1 of the fourth year before the withdrawal until 31 days before it.
The 31-day carve-out is deliberate. It lets you close on your new home, move in, and still make a qualifying withdrawal in the first 30 days of ownership.
What counts as a qualifying home
A qualifying home is a housing unit located in Canada, either existing or under construction. That includes:
- Detached and semi-detached houses, townhouses and condominium units
- Mobile homes and apartments in duplexes, triplexes or fourplexes
- Shares in a co-operative housing corporation that give you an equity interest. Co-op shares that only give you the right to rent don't count.
- Pre-construction homes, as long as you have a signed agreement with the builder
The deciding factor is intent to occupy. A cottage or rental property you don't plan to live in as your main home doesn't qualify, whatever the building type.
The timeline
| Milestone | Deadline |
|---|---|
| Earliest withdrawal | Any time before closing, once you meet the conditions |
| Latest withdrawal | Within 30 days after you acquire the home |
| Agreement to buy or build | Before October 1 of the year after the withdrawal |
| Move in | Intend to occupy within one year of buying or building |
| Close the FHSA | By December 31 of the year after your first qualifying withdrawal |
Don't miss the 30-day window. If you close on March 1 and request the withdrawal on April 5, it's taxable, even though you meet every other condition. Send Form RC725 to your FHSA provider well before closing day.
How to make a qualifying withdrawal
- Sign your purchase or construction agreement.
- Complete CRA Form RC725, Request to Make a Qualifying Withdrawal from your FHSAs. Part A is a checklist that confirms you're eligible.
- Send the form to your FHSA issuer (your bank or brokerage). They complete their part and release the funds with no tax withheld.
- Sell investments early if needed. If your FHSA holds ETFs or GICs, give yourself time to sell or for GICs to mature so the cash is ready for closing.
- Close the account by the end of the following year, or transfer whatever's left to your RRSP.
You can take the balance in one withdrawal or several. You need a separate RC725 for each one.
Non-qualifying withdrawals
If you withdraw for any other reason, or don't meet every condition, the full amount is added to your income for the year and taxed at your marginal rate. Your FHSA provider withholds tax at source, and you settle up when you file your return. The room you used isn't restored.
If the CRA later finds that a withdrawal you claimed as qualifying didn't meet the conditions, it can reassess it as taxable.
If you don't use it all, or don't buy
- Leftover money after buying: transfer it to your RRSP or RRIF, or withdraw it as taxable income, before the account must close.
- Never buying: transfer the balance directly to your RRSP or RRIF at any time before the closing deadline. The transfer doesn't use RRSP contribution room.
- Doing nothing: anything still in the account at the deadline is treated as a taxable withdrawal.
Combining it with the Home Buyers' Plan
You can make a qualifying FHSA withdrawal and a Home Buyers' Plan (HBP) withdrawal from your RRSP for the same home. The HBP limit is $60,000 per person. The key difference is that HBP money has to be repaid to your RRSP over 15 years, while FHSA money never has to be repaid. Our account comparison walks through the order to use them.
Frequently asked questions
Is there a limit on how much I can withdraw tax-free?
No. If you qualify, you can withdraw the entire balance tax-free, including all investment growth.
Can I withdraw from my FHSA after I move in?
Yes, but only within 30 days of acquiring the home. After that, withdrawals are taxable.
Can I use the FHSA for a down payment and closing costs?
The rules don't restrict how you spend a qualifying withdrawal once the conditions are met. Most people use it for the down payment, land transfer tax and closing costs.
Do I have to live in the home for a minimum time?
The requirement is that you intend to occupy it as your principal residence within one year of buying or building it. The CRA has indicated there's no fixed minimum length of stay.
Can I buy a home outside Canada with my FHSA?
No. The qualifying home must be located in Canada.
Sources
- Canada Revenue Agency, Form RC725, Request to Make a Qualifying Withdrawal from your FHSAs
- Department of Finance Canada, Design of the Tax-Free First Home Savings Account
- Canada Revenue Agency, First Home Savings Account (FHSA)