First-Time Home Buyer Account in Ontario: Opening an FHSA

You may have heard that there is a tax-free account for people saving for a first home. It is called the First Home Savings Account, or FHSA. Before you move money into one, it helps to know whether you can open it, where, and how much you are allowed to put in.

This article walks through the opening rules, the first-time buyer test, how contribution room is worked out, and what happens when you take the money out. Your own facts, such as past home ownership or a spouse's history, can change the answer, so treat this as a guide to the questions to ask.

What an FHSA is and who can open one

An FHSA is a registered plan that lets a first-time home buyer save tax-free for a qualifying first home, up to set limits. It is separate from your other savings and has its own rules about who can use it and how much goes in.

To open one, all of the following must be true:

• You are a Canadian resident.
• You are at least 18 (19 in some provinces and territories).
• You are not older than 71 at December 31 of the year you open the account.
• You are a first-time home buyer under the test described below.

The first-time home buyer test

For opening an FHSA, you count as a first-time home buyer if you did not live in a home you owned, alone or jointly, as your principal residence in the current calendar year before you opened the account or in the four preceding calendar years.

Your relationship matters too. A spouse or common-law partner's ownership during that same period also counts against you. So if your partner lived in a home they owned during the window, you may not qualify even if you have never owned anything yourself.

Cases involving inherited homes, homes owned with relatives, or a recent separation can be less clear. If your history is not simple, confirm your status with the account issuer or a lawyer or accountant before you contribute.

Where to open one and what you will need

An FHSA is opened with an issuer, such as a bank, credit union, or trust or insurance company. You give the issuer your Social Insurance Number and date of birth.

Accuracy matters here. If the information is wrong, the registration may be revoked back to the opening date. Check the spelling of your name and your numbers before you sign.

You can open one or more FHSAs, but the annual and lifetime limits apply across all of them combined. Opening a second account does not give you a second set of room.

How contribution room works

The annual limit is $8,000, including the year you open your first FHSA, and the lifetime limit is $40,000. Unused room carries forward to the next year, up to a maximum of $8,000, so the most you can contribute in one year is $16,000. The carry-forward does not raise the $40,000 lifetime limit.

Your room for a year is the unused re-participation room at the end of the prior year, plus $8,000, plus the participation room carry-forward, minus any excess FHSA amount at the end of the prior year. For example, a $2,000 excess from 2025 leaves 2026 room of $6,000.

Going over has a cost. Over-contributing triggers a tax of 1% per month on the highest excess FHSA amount in that month. Keep a running record of what you put in across every account, especially if you use more than one issuer.

Tax treatment, withdrawals and closing the account

FHSA contributions are generally deductible, but a transfer from an RRSP to an FHSA is not deductible. Qualifying withdrawals to buy or build a home are non-taxable, and they are not repayable.

To make a qualifying withdrawal, you complete Form RC725 and give it to your FHSA issuer. A qualifying withdrawal generally needs:

• A written agreement to buy or build a qualifying home, with acquisition or completion before October 1 of the year after the withdrawal.
• An intention to occupy the home as your principal residence within one year.
• First-time buyer status, tested for the current year before the withdrawal and the previous four calendar years, ignoring the 30 days before the withdrawal.
• No acquisition of the home more than 30 days before the withdrawal.

The account does not last forever. It must be closed by December 31 of the earliest of the 15th anniversary of opening your first FHSA, the year you turn 71, or the year after your first qualifying withdrawal.

What to do next

• Write down every home you or your spouse or partner owned and lived in over the current year and the last four calendar years.
• Confirm your age and residency fit the opening rules.
• Compare issuers and ask how they track contribution room.
• Have your SIN and date of birth ready and check them for errors.
• Keep a simple log of contributions across all accounts.
• Before you withdraw, make sure you have a signed agreement to buy or build and the Form RC725 ready.

If you are unsure about the first-time buyer test, a recent separation, or how an FHSA fits with other plans for your purchase, a lawyer or accountant can confirm how the rules apply to you.

Frequently asked questions