FHSA rules: $8,000 a year, $40,000 lifetime, a 15 year window

What are the FHSA limits and eligibility rules?

An FHSA lets a first time home buyer save for a qualifying first home: contributions are generally deductible and a qualifying withdrawal comes out tax free canada.ca. These are the limits as of October 2026.

Your client must be a Canadian resident, at least 18, and no older than 71 at December 31 of the year they open the account. They can't have lived, in the current calendar year or the four before it, as a principal residence in a home they owned or jointly owned, or in one their spouse or common law partner owned. A home outside Canada counts too canada.ca. A client can hold more than one FHSA, but the room is shared across all of them canada.ca.

How do FHSA room and carryforward build from 2026?

Room is $8,000 in the year your client opens their first FHSA and the carryforward that year is $0. After that, the carryforward is the lesser of $8,000 and last year's carryforward plus $8,000 minus last year's contributions and transfers, and total room can't exceed $40,000 minus everything already put in canada.ca. Under the Act, the carryforward is nil until the maximum participation period has started, which is when the first FHSA is opened laws-lois.justice.gc.ca.

Take a client who opens an FHSA in 2026 and puts nothing in that year, then contributes $10,000 in 2027, $14,000 in 2028 and $8,000 in each of 2029 and 2030.

The 2028 carryforward is $8,000 plus $8,000 minus the $10,000 contributed in 2027, so $6,000. In 2030 the lifetime cap and the annual room meet: $40,000 minus $32,000 leaves exactly $8,000.

The trap is the client who waits. Unused room only carries forward $8,000, so a client who opens in 2026 and contributes nothing until 2029 has $16,000 of room that year, not $32,000. The CRA's own example of a 2026 opener with no contributions shows $16,000 of room for 2027 canada.ca. Opening an account with $0 starts the room, but it also starts the 15 year clock.

When can your client deduct FHSA contributions?

FHSA contributions are deductible in the year they're made or carried forward to a later year, even after the account is closed, and lifetime deductions can't exceed $40,000 canada.ca. So a student who contributes $8,000 in 2026 can hold the deduction until a higher income year.

Three contributions are never deductible. A contribution made in the first 60 days of 2027 can't be claimed on the 2026 return; the FHSA has no RRSP style 60 day window canada.ca. A contribution made after the first qualifying withdrawal can't be deducted in that year or any later one. And a transfer from an RRSP into the FHSA is never deductible, because it uses FHSA room without a new deduction.

An RRSP to FHSA transfer goes direct on Form RC720. It reduces unused FHSA room, it can't exceed that room at the time of the transfer, and it doesn't restore the client's RRSP deduction room canada.ca. For RRSP room itself, see the 2026 RRSP limit.

What makes an FHSA withdrawal qualifying?

A withdrawal is tax free only if every condition holds when it's made canada.ca:

• your client is a first time home buyer: no owned home lived in as a principal residence in the current year (ignoring the 30 days before the withdrawal) or the four prior calendar years
• there is a written agreement to buy or build a qualifying home, with acquisition or completion before October 1 of the year after the withdrawal
• the home wasn't acquired more than 30 days before the withdrawal
• the client is a Canadian resident from the first qualifying withdrawal until the home is acquired
• the client occupies, or intends to occupy, the home as a principal residence within one year
• Form RC725 is completed and given to the FHSA issuer

Nothing is repaid, there is no minimum holding period, and the money can come out in one or several withdrawals. Your client can also use the Home Buyers' Plan from an RRSP for the same home, as long as both sets of conditions are met at each withdrawal canada.ca. Any other withdrawal is taxable in full: the CRA's example is a $6,000 withdrawal for a car, all of it income for the year.

As of October 2026, the CRA page adds back the part of a taxable withdrawal that didn't clear an excess amount as room your client can use again in a later year canada.ca. A qualifying withdrawal doesn't create room, and putting it back counts as a new contribution that isn't deductible canada.ca.

What does an overcontribution cost, and when must the FHSA close?

Contributions and RRSP transfers above the year's room create an excess FHSA amount, taxed at 1% a month on the highest excess in each month until it's gone canada.ca. In the CRA's example, $10,000 contributed on November 15, 2025 against $8,000 of room leaves a $2,000 excess: $20 for November plus $20 for December, $40 in total, and the new 2026 room clears it on January 1. Remove an excess with a designated withdrawal or a designated transfer on Form RC727, and report the tax on Form RC728.

The maximum participation period ends December 31 of the year in which the earliest of these happens: the 15th anniversary of opening the first FHSA, the client turns 71, or the year after the first qualifying withdrawal canada.ca. Section 146.6(1) of the Act says the same thing in different words: the end of the year following the 14th anniversary, age 70 or the first qualifying withdrawal laws-lois.justice.gc.ca.

Before that date, move what's left directly to an RRSP or RRIF on Form RC721 with no immediate tax and no effect on RRSP room, or withdraw it as income canada.ca. Leave anything in and the accounts lose FHSA status: the fair market value at that point is income for the year. A client who opened in August 2025 has until December 31, 2040 canada.ca.

Where do FHSA amounts go on the T1?

The deduction is worked out on Schedule 15 and claimed on line 20805, taxable withdrawals go on line 12905, and the issuer's T4FHSA slip supplies the figures canada.ca. File Schedule 15 for the year your client opens their first FHSA even if they contributed nothing canada.ca. Skip it and the CRA has no record that the clock and the room have started.