First Home Savings Account (FHSA) for newcomers to Canada
The First Home Savings Account (FHSA) is a Canadian registered plan designed to help eligible first-time home buyers save for a qualifying home.
An FHSA can provide two major Canadian tax advantages:
- Contributions are generally deductible for Canadian income-tax purposes.
- Investment income and growth inside the FHSA are generally not taxed while held in the account, and a properly made qualifying withdrawal is generally tax-free.
An FHSA is therefore different from both an RRSP and a TFSA.
An RRSP generally provides a deduction when contributions are made, but RRSP withdrawals are generally taxable unless a special rule applies.
A TFSA generally provides tax-free qualifying withdrawals, but contributions are not deductible.
The FHSA combines important features of both systems for an eligible first-time home buyer.
Important for newcomers: Canadian immigration status and Canadian income-tax residency are different concepts. A person on a work permit or study permit may become a Canadian tax resident and potentially qualify for an FHSA if all other statutory requirements are met. A visa or permit by itself does not determine FHSA eligibility.
Who can open an FHSA?
At the time you open the account, you generally must be a qualifying individual under the FHSA rules.
The CRA currently requires the individual to satisfy all of the applicable conditions, including:
- being a resident of Canada;
- being at least 18 years old, subject to the legal-age rules in the province or territory;
- being 71 years of age or younger at the end of the year in which the FHSA is opened; and
- satisfying the first-time home buyer test.
In provinces and territories where the legal age to enter into a contract is 19, an individual may need to be 19 to open the account.
First-time home buyer test
The FHSA first-time home buyer test is more specific than simply asking whether you have ever owned property.
Generally, at the time you open your FHSA, you must not have lived, at any time in the calendar year before opening the account or at any time in the preceding four calendar years, in a qualifying home that you owned or jointly owned, or that was owned or jointly owned by your spouse or common-law partner if you had a spouse or common-law partner at the relevant time.
The test therefore looks at both:
- your own ownership and residence; and
- in the relevant circumstances, your current spouse or common-law partner’s ownership and residence.
A person can therefore sometimes qualify even though they previously owned a home, depending on when they stopped living in it and the four-year lookback period.
A home outside Canada can also matter
The FHSA first-time home buyer definition can take into account a property outside Canada when determining whether the individual lived in a property that would otherwise qualify as a qualifying home if it were located in Canada.
This is particularly important for newcomers who previously owned and lived in a home in another country.
Do not assume that owning a foreign home automatically has no effect on FHSA eligibility.
Temporary residents and international students
A temporary resident can potentially qualify for an FHSA if the person is a resident of Canada for purposes of the FHSA residency requirement and meets the remaining conditions.
Therefore:
- a work permit does not automatically disqualify you;
- a study permit does not automatically disqualify you;
- international-student status does not automatically disqualify you;
- Canadian permanent residence is not listed as a standalone FHSA requirement.
The key issue is whether you meet the FHSA's statutory Canadian-residency and first-time-home-buyer requirements when the account is opened.
FHSA eligibility should not be confused with other first-time-home-buyer programs that can have different citizenship or immigration requirements.
FHSA participation room
Your first FHSA gives you $8,000 of participation room for the year in which you first open an FHSA.
This is an important difference from a TFSA.
TFSA contribution room can accumulate without opening an account.
FHSA participation room generally starts when you open your first FHSA.
After the first FHSA is opened, you generally receive another $8,000 of participation room for each subsequent year, subject to the lifetime limit and other rules.
The lifetime FHSA limit is $40,000.
Opening multiple FHSAs does not create multiple sets of $8,000 of room. Your participation room is a combined limit across your FHSAs.
2026 FHSA limits
For 2026:
- annual FHSA participation room: $8,000
- lifetime FHSA limit: $40,000
- unused participation room that can carry forward: generally subject to a maximum carry-forward amount of $8,000
Therefore, if you open your first FHSA in 2026 and contribute nothing during 2026, you can generally have up to $8,000 of unused room available for 2027.
If you later contribute $8,000 in 2027, you could generally use the 2027 annual room plus the carried-forward 2026 room, subject to the lifetime and annual rules.
Example: opening an FHSA in 2026
Suppose you open your first FHSA in April 2026.
Your participation room for 2026 is generally $8,000.
You contribute $5,000 during 2026.
The remaining $3,000 does not disappear. Unused participation room can carry forward, subject to the FHSA carry-forward rules.
The following year, you receive the new annual participation room as well.
Do not confuse contribution with participation room
Your FHSA can receive both:
- new cash or property contributed to the FHSA; and
- eligible direct transfers from an RRSP.
Both can use FHSA participation room.
A direct RRSP-to-FHSA transfer is generally not an additional $8,000 of room on top of your annual limit.
RRSP transfers into an FHSA
You can make a qualifying direct transfer from an RRSP to your FHSA, subject to the FHSA participation-room rules.
An RRSP-to-FHSA transfer:
- generally does not provide an additional tax deduction;
- uses available FHSA participation room;
- cannot be used to exceed your FHSA participation room without creating an excess amount.
CRA provides specific procedures for direct transfers, including Form RC720 for certain RRSP-to-FHSA transfers.
If you withdraw the money from the RRSP personally and then contribute cash to the FHSA, that is not the same as a direct transfer.
An ordinary RRSP withdrawal can be taxable.
FHSA contributions are generally deductible
Contributions to an FHSA are generally deductible from income for Canadian tax purposes, subject to the applicable rules and available participation room.
Unlike an RRSP contribution, however, an FHSA contribution does not have to be deducted in the same year.
An eligible contribution can generally be carried forward and claimed as a deduction in a later year.
This can be useful for newcomers whose Canadian taxable income is initially low but becomes higher after starting Canadian employment.
Investment growth inside an FHSA
Income earned inside an FHSA can generally include:
- interest;
- dividends;
- capital gains;
- other permitted investment income.
Qualifying FHSA investment income is generally sheltered from Canadian tax while it remains inside the account under the FHSA rules.
This does not mean every type of property is automatically permitted.
FHSA investments must satisfy the applicable qualified-investment rules, and prohibited investments or advantage transactions can create additional tax consequences.
What is a qualifying home?
A qualifying home generally must be a housing unit located in Canada that satisfies the statutory definition.
The rules can also cover certain housing interests, including specified interests in cooperative housing corporations.
The qualifying home can generally be:
- an existing home;
- a home being built;
- certain other qualifying housing arrangements covered by the legislation.
The property must be intended to be occupied as your principal place of residence within the required period.
A rental or investment property is not automatically a qualifying home
The FHSA is designed for a home that the buyer intends to occupy as their principal place of residence.
Buying a property solely as an investment or rental property does not satisfy the normal principal-residence intention requirement for a qualifying withdrawal.
Qualifying FHSA withdrawal
A withdrawal is not automatically tax-free simply because you use the money toward real estate.
To make a qualifying withdrawal, the statutory conditions must be satisfied.
CRA currently requires, among other things:
- a qualifying withdrawal request using Form RC725;
- first-time home buyer status for purposes of the withdrawal;
- a written agreement to buy or build a qualifying home;
- the acquisition or construction completion date to meet the applicable deadline, including the requirement that it occur before October 1 of the year following the withdrawal;
- the qualifying home not having been acquired more than 30 days before the withdrawal;
- Canadian residency from the date of the first qualifying withdrawal until the earlier of acquisition of the qualifying home or death;
- an intention to occupy the home as a principal place of residence within one year after acquiring or building it.
These conditions mean that simply taking cash out of an FHSA and eventually buying a property does not necessarily make the withdrawal qualifying.
First-time home buyer status for the withdrawal is a separate compliance point
The first-time home buyer test applies when determining whether a person can make a qualifying withdrawal.
Therefore, the fact that you were eligible to open an FHSA does not mean every later withdrawal will automatically qualify.
Keep the purchase agreement, closing documents, FHSA withdrawal request, and other supporting records.
Using an FHSA to buy a home with a spouse or partner
Each eligible individual can have their own FHSA.
If both spouses or common-law partners independently satisfy the relevant requirements, they can potentially use their own FHSA funds toward the same qualifying home.
The individuals must each satisfy the requirements applicable to their own qualifying withdrawals.
A spouse's eligibility should not simply be assumed from the other spouse's FHSA eligibility.
FHSA and the Home Buyers' Plan (HBP)
The FHSA and the RRSP Home Buyers' Plan can be used for the same qualifying home, provided all of the conditions for each program are met.
CRA currently states that an individual can make an FHSA qualifying withdrawal and also withdraw funds under the HBP for the same home.
The current HBP withdrawal limit is $60,000.
The HBP is a separate program with its own first-time-home-buyer conditions, repayment requirements, and withdrawal rules.
Using both programs therefore does not merge their rules.
You must satisfy the requirements of both programs independently.
HBP repayment rules changed for first withdrawals from 2024 to 2025 and later years
CRA's current HBP guidance provides temporary repayment relief for qualifying first withdrawals made from January 1, 2024 through December 31, 2028.
For individuals making their first HBP withdrawal between January 1, 2026 and December 31, 2028, the 15-year repayment period begins in the fifth year following the year of the first withdrawal.
For example, a first HBP withdrawal in 2026 has a first repayment year of 2031 under the current temporary rule.
This HBP rule is separate from FHSA withdrawal rules.
What happens if you do not buy a home?
An FHSA is not intended to stay open indefinitely.
The maximum participation period is determined by the statutory FHSA rules and can end based on events such as:
- the 15th anniversary of opening the first FHSA;
- the year the holder turns 71;
- certain dates following a qualifying withdrawal;
- other specified statutory ending events.
The exact end date depends on which event occurs first.
Therefore, the simplified statement "an FHSA lasts exactly 15 years" is incomplete.
When the FHSA reaches the end of its maximum participation period, the remaining property generally must be dealt with under the FHSA closing rules.
Transfer an FHSA to an RRSP or RRIF
In many cases, remaining FHSA property can be transferred directly to an RRSP or RRIF on a tax-deferred basis when the statutory conditions for the transfer are satisfied.
A direct transfer is different from withdrawing the money personally.
A direct transfer to an RRSP or RRIF can generally avoid an immediate income inclusion where the applicable transfer rules are satisfied.
By contrast, a taxable FHSA withdrawal is generally included in income.
A direct transfer should be completed through the financial institution using the applicable CRA transfer process rather than by taking the money personally and re-contributing it.
Taxable FHSA withdrawals
If a withdrawal does not meet the rules for a qualifying withdrawal and is not otherwise eligible for a tax-deferred transfer, it can be taxable.
A taxable FHSA withdrawal is generally included in income for the year.
The FHSA issuer may also have withholding obligations depending on the type of taxable payment.
Do not assume that every withdrawal made for a home purchase is automatically tax-free.
Becoming a non-resident after opening an FHSA
If you open an FHSA while resident in Canada and later become a non-resident, the account does not necessarily have to be closed immediately.
CRA states that a non-resident can generally continue to participate in an FHSA after becoming non-resident, subject to restrictions.
One particularly important restriction is:
A non-resident cannot make a qualifying withdrawal to buy or build a qualifying home while non-resident.
This is because Canadian residency is one of the conditions for a qualifying withdrawal.
A taxable FHSA withdrawal made while non-resident can also be subject to Canadian withholding tax. CRA currently states that the general Part XIII withholding rate is 25% unless reduced by an applicable tax treaty.
Therefore, a newcomer who expects to leave Canada before buying a home should understand the non-resident rules before withdrawing FHSA funds.
Can a non-resident continue contributing?
CRA's current non-resident guidance allows an individual who becomes non-resident after opening an FHSA to continue participating subject to the FHSA rules, but participation does not make a non-resident qualifying-home withdrawal available.
Before making contributions while non-resident, review the current CRA rules and the individual's complete FHSA participation history.
The tax treatment in the person's new country of residence must also be considered.
Canada not taxing the FHSA in the same way does not require another country to recognize the FHSA's Canadian tax treatment.
Newcomer example: temporary resident arrives in Canada in 2026
Suppose a 25-year-old worker arrives in Canada during 2026 on a temporary work permit.
The person becomes a resident of Canada for tax purposes and has never lived in a home that they or their spouse/common-law partner owned during the relevant first-time-home-buyer lookback period.
If all FHSA conditions are met, the person may be able to open an FHSA in 2026.
The first-year participation room is $8,000.
The person could make qualifying contributions, subject to that $8,000 room, and generally claim an FHSA contribution deduction under the applicable rules.
The person's work-permit status itself does not prevent the FHSA from being opened.
Newcomer example: previously owned a home abroad
Suppose a newcomer owned and lived in a house outside Canada before moving to Canada.
The person should not automatically assume that the foreign property is irrelevant.
The FHSA first-time-home-buyer definition can take into account a home outside Canada when applying the relevant ownership and residence test.
The person needs to examine:
- when they stopped living in the property;
- whether they owned it;
- whether a spouse/common-law partner owned it;
- whether they lived there during the relevant calendar years;
- when the FHSA would be opened.
The four-calendar-year lookback can make timing important.
Newcomer example: opened FHSA but later leaves Canada
Suppose a temporary resident opens an FHSA while resident in Canada and later moves permanently to another country before purchasing a home.
The FHSA can generally remain open.
However, the person cannot make a qualifying withdrawal while non-resident to buy a Canadian home because Canadian residency is required for the qualifying-withdrawal period.
A taxable withdrawal can have Canadian withholding consequences, and the destination country's treatment of the FHSA must be reviewed separately.
Practical checklist before opening an FHSA
Check all of the following:
- Are you currently a resident of Canada for FHSA purposes?
- Are you at least the applicable legal age?
- Are you 71 or younger at December 31 of the year you open the FHSA?
- Have you met the first-time-home-buyer test?
- Did you or your spouse/common-law partner own and live in a home in Canada or abroad during the relevant lookback period?
- Have you already opened an FHSA?
- What is your total FHSA participation room across all accounts?
- Have you made previous FHSA contributions or RRSP-to-FHSA transfers?
- Are you approaching the $40,000 lifetime FHSA limit?
- Will the intended property satisfy the qualifying-home requirements?
- Will you remain a Canadian resident through the required qualifying-withdrawal period?
- Are you also planning to use the RRSP Home Buyers' Plan?
Bottom line
The FHSA can be especially useful for newcomers because it combines an income-tax deduction for eligible contributions with tax-free treatment for qualifying home-purchase withdrawals.
For 2026:
- Annual FHSA participation room is $8,000.
- Lifetime FHSA participation limit is $40,000.
- Opening the first FHSA starts the individual's participation-room clock.
- Unused room can carry forward, but only within the FHSA carry-forward rules.
- An RRSP-to-FHSA transfer uses FHSA participation room and is not an additional deduction.
- A qualifying home generally must be located in Canada.
- A qualifying withdrawal must satisfy specific purchase, timing, residency, and occupancy conditions.
- FHSA withdrawals and HBP withdrawals can be used for the same qualifying home when each program's conditions are satisfied.
- Becoming a non-resident does not automatically close an FHSA, but a non-resident cannot make a qualifying home-purchase withdrawal.
- A taxable withdrawal may be subject to Canadian withholding when the holder is non-resident.
- Remaining FHSA property can generally be transferred directly to an RRSP or RRIF when the applicable closing/transfer rules are satisfied.
Because FHSA eligibility depends on the individual's residence, ownership history, spouse/common-law-partner circumstances, account history, and the timing of the home purchase, check the CRA rules before making a large contribution or withdrawal.
This information is general educational information and is not individualized Canadian tax, legal, immigration, real-estate, or investment advice.