FHSA Update 2025: Rules, Limits, and How to Make the Most of Your First Home Savings Account

The First Home Savings Account (FHSA) has now been available for two full years, and hundreds of thousands of Canadians have opened accounts. If you haven’t opened one yet — or want to understand the full ruleset — here is everything you need to know for 2025.

What Is the FHSA?

The FHSA is a registered account that combines the best tax features of both the RRSP and the TFSA:

• Contributions are tax-deductible (like an RRSP)
• Investment growth is tax-free (like a TFSA)
• Qualifying withdrawals are tax-free (unlike an RRSP)

It was introduced in the federal 2022 budget and became available at financial institutions beginning April 1, 2023. The explicit purpose is to help first-time buyers save for a home purchase.

2025 FHSA Contribution Limits

Parameter	2025 Amount
Annual contribution limit	$8,000
Lifetime contribution limit	$40,000
Maximum annual carry-forward	$8,000

The annual limit has been $8,000 since the FHSA launched and is not indexed to inflation (unlike RRSP and TFSA limits). The $40,000 lifetime cap means you reach the limit after five years of maximum contributions.

Carry-Forward Rules

Unlike TFSAs, FHSA unused room can only be carried forward one year at a time. The carry-forward is capped at $8,000.

Example timeline:

Year	Annual Limit	Contributed	Carry-Forward Earned	Cumulative Room
2023	$8,000	$0	$8,000	$8,000
2024	$8,000	$0	$8,000 carry (from 2023)	$16,000
2025	$8,000 (current year)	$16,000 contribution possible	resets	—

However, only the immediately preceding year’s unused room carries forward. In the example above, if you missed 2023 and 2024 entirely, your 2025 room is only $8,000 (current year) + $8,000 (2024 carry-forward) = $16,000 — not $24,000. The 2023 unused room was lost if not carried into 2024.

Key rule: Open your FHSA as early as possible, even if you cannot contribute right away. Simply opening the account establishes the annual contribution room accumulation. You do not need to invest immediately.

Eligibility Requirements

To open and contribute to an FHSA, you must:

1. Be a Canadian resident for tax purposes
2. Be at least 18 years old (or 19 in provinces where the age of majority is 19)
3. Be a first-time home buyer: you have not owned a qualifying home at any time during the current calendar year or the four preceding calendar years, and neither has your spouse or common-law partner

Once you have made a qualifying withdrawal to purchase a home, you lose FHSA eligibility going forward.

What Investments Can You Hold?

The FHSA can hold the same qualified investments as an RRSP or TFSA:

• GICs (Guaranteed Investment Certificates)
• Government and corporate bonds
• Mutual funds
• ETFs (Exchange-Traded Funds)
• Individual stocks listed on designated exchanges
• Cash and high-interest savings

Most banks, credit unions, and online brokerages now offer FHSAs. Shopping around matters — some institutions charge annual account fees, while others (particularly online brokerages) offer fee-free FHSAs.

Tax Deductibility

FHSA contributions are deductible on your T1 return, reducing your taxable income dollar for dollar. Unlike RRSP contributions:

• There is no 60-day carry-back — FHSA contributions must be made before December 31 of the tax year to be deducted in that year
• Contributions are reported on Form T1028 (or directly on the T1)
• You can defer claiming the deduction to a future year if that is more tax-efficient (e.g., you expect higher income in a later year)

Example — $8,000 contribution, $100,000 income in Ontario:

• Marginal rate: approximately 43.41% (combined federal + provincial)
• Tax saved: $8,000 × 43.41% = approximately $3,473

Qualifying Withdrawals (Tax-Free)

To make a tax-free (qualifying) withdrawal from your FHSA, all of the following must be met:

1. You are a first-time home buyer (same definition as above — no home ownership in current or prior 4 calendar years)
2. You have a written agreement to buy or build a qualifying home before October 1 of the following year
3. You intend to occupy the home as your principal place of residence within one year of buying/building
4. The qualifying home is located in Canada
5. You complete Form RC725 and submit it to your FHSA issuer

Qualifying withdrawals are completely tax-free. There is no repayment requirement — unlike the RRSP Home Buyers’ Plan.

Non-Qualifying Withdrawals

If you withdraw from your FHSA for reasons other than a qualifying home purchase, the withdrawal is fully taxable as income in the year it is received. This is the key risk of over-contributing or changing plans — a non-qualifying withdrawal loses both the deduction and the growth.

FHSA vs. RRSP Home Buyers’ Plan (HBP): Can You Use Both?

Yes. The FHSA and the RRSP Home Buyers’ Plan can be used together for the same home purchase.

RRSP Home Buyers’ Plan 2025:

• Withdraw up to $60,000 from your RRSP tax-free for a first home
• Must be repaid over 15 years (1/15 of the amount per year)
• Failure to repay results in the year’s repayment amount being added to taxable income

Combining both programs maximizes your tax-advantaged down payment:

Source	Maximum Available
FHSA (lifetime)	$40,000
RRSP HBP	$60,000
Combined maximum	$100,000

For a couple, both partners can use their own FHSA + HBP, potentially providing up to $200,000 in tax-advantaged down payment funds.

FHSA Account Lifetime and Succession

The FHSA must be closed by the earliest of:

• December 31 of the year you make a qualifying withdrawal to buy a home
• December 31 of the year you turn 71
• December 31 of the 15th year after the year you first opened an FHSA
• If you become a non-resident of Canada

What Happens at Account Closure Without Home Purchase?

If you close the FHSA without making a qualifying withdrawal (e.g., you give up on buying a home), you can:

1. Transfer to an RRSP or RRIF — the transfer is tax-free and does not use any RRSP contribution room
2. Withdraw as taxable income — the funds are added to your income in the year withdrawn

The RRSP transfer option is valuable: it preserves the tax deduction you already claimed, and the funds grow tax-deferred until RRSP withdrawal.

FHSA Practical Tips

1. Open an FHSA immediately if you are a first-time buyer under 71 — even with $1 — to start accumulating carry-forward room
2. Prioritize contributions early in the year so investments have maximum time to compound tax-free
3. Hold growth-oriented assets in your FHSA — since all growth is sheltered, this is ideal for stocks and equity ETFs
4. Don’t skip years — unused room from more than one year back is permanently lost (only one year carries forward)
5. Defer the deduction if your income is temporarily low — contribute now but claim the deduction in a higher-income year
6. Plan with your spouse: both partners can have separate FHSAs, doubling the tax-free accumulation potential

Summary of Key Numbers

Parameter	Amount
Annual limit (2025)	$8,000
Carry-forward (max)	$8,000 (one prior year only)
Lifetime limit	$40,000
Max qualifying contribution years	5 years (at $8,000/year)
HBP RRSP withdrawal limit	$60,000
Combined FHSA + HBP max	$100,000 per person
Account lifetime	Lesser of 15 years, age 71, or qualifying withdrawal

Sources

• CRA — First Home Savings Account
• CRA — How to open an FHSA
• CRA — FHSA qualifying withdrawal conditions
• CRA — Home Buyers’ Plan