FHSA 2025 Guide: Eligibility, $8,000 Limit, and Tax Benefits

(CANADA) For many New Canadians and other first-time home buyers, the First Home Savings Account (FHSA) remains one of the clearest paths to a first down payment in 2025. It blends the tax break of an RRSP with the tax-free growth and withdrawal rules of a TFSA, but it’s aimed squarely at your first home.

As of August 21, 2025, the FHSA still offers $8,000 in annual room and a $40,000 lifetime cap, with tax-deductible contributions, tax-free growth, and tax-free withdrawals for a qualifying home purchase. Rules that matter most are simple: you must be a Canadian resident between 18 and 71, qualify as a first-time buyer (no home owned or lived in by you or your spouse/common-law partner in the last four years), and you can’t have used an FHSA to buy a prior home.

The Canada Revenue Agency (CRA) also stressed in July 2025 that people should track their contributions closely to avoid over-contributing.

Quick overview: How the FHSA helps in 2025

• Who qualifies: Canadian residents aged 18–71 who are first-time home buyers. New Canadians who meet residency and first-time buyer rules can open an FHSA.
• How much you can put in: $8,000 each year, up to $40,000 total. Unused room carries forward, but only up to $8,000 can be carried into any single year.
• Carry-forward mechanics: If you opened an FHSA in 2023 and waited to contribute until 2024, you could put in up to $16,000 in 2024 (the current year’s $8,000 plus up to $8,000 of carried-forward room).
• Tax support at every step: Contributions are tax-deductible, growth is tax-free, and qualifying withdrawals for a first home are tax-free.
• Key timelines: You must buy within 15 years of opening the FHSA or by the end of the year you turn 71—whichever comes first. If you don’t buy, you can transfer the funds to an RRSP or RRIF within 30 days to avoid taxes.

Step-by-step: From eligibility to keys in hand

1) Confirm you qualify

What you do:
– Check that you are a Canadian resident, are at least 18 and not turning 72 this year, and meet the first-time home buyer definition (no home owned or lived in by you or your spouse/common-law partner during the last four years).
– Make sure you haven’t opened or used an FHSA for a previous home.

What to expect from authorities:
– The CRA’s rules define who qualifies and how withdrawals remain tax-free when used for a first home. The agency released guidance in July 2025 reminding people to track their limits so they don’t go over.

Timeframe:
– You can check this right away. Many New Canadians do this as soon as they receive Canadian residency status that allows banking and investment accounts.

Tip for New Canadians:
– If you plan to buy in Canada 🇨🇦 and meet the rules, opening the account early helps because carry-forward only starts once the FHSA is open.

2) Open an FHSA at a financial institution

What you do:
– Visit a bank, credit union, or investment firm that offers FHSAs (for example, RBC, Scotiabank, TD, and Edward Jones).
– Bring basic identification, your Social Insurance Number (SIN), and proof of residency.

What to expect:
– The institution confirms your details and opens the account. The CRA sets the rules but doesn’t open your account; banks and firms do that under CRA rules.

Timeframe:
– Opening an account varies by institution. Ask for the steps and expected timing when you start.

3) Contribute up to your annual room

What you do:
– Decide how much to put in this year—up to $8,000.
– If you have unused room from a previous year (after opening the account), you can carry forward up to $8,000 into a single year. That means your maximum in a year can be $16,000 when you have full carry-forward available from a prior year.
– Keep clear records of each contribution date and amount.
– Claim your tax deduction when you file your return.

What to expect from authorities:
– The CRA allows a tax deduction for contributions and monitors compliance with limits. In July 2025, the CRA again warned people about over-contributing and urged careful tracking.

Timeframe:
– You control when to contribute within the year. Your deduction is taken when you file your tax return for that calendar year.

Important safeguards:
– Don’t go over your allowed room. Over-contributions can lead to taxes on growth and other headaches. If you’re unsure of your room, ask your institution to show your FHSA transaction history and compare it with your own records.

4) Invest inside the FHSA for tax-free growth

What you do:
– Choose eligible investments, such as GICs, mutual funds, or ETFs, according to your risk comfort and time horizon.
– Review returns and fees. Keep money invested inside the FHSA so growth remains tax-free.

What to expect from authorities:
– There’s no tax on growth inside the account. The CRA’s rules govern which withdrawals qualify.

Timeframe:
– Investing starts after your contribution posts. You can adjust your mix over time, but remember your home timeline.

Tip for New Canadians:
– Many newcomers build credit and savings at the same time. The FHSA separates your home savings from other goals, so you’re less likely to dip into it for non-housing needs.

5) Plan your home purchase within the allowed window

What you do:
– Aim to buy within 15 years of opening the FHSA or before the end of the year you turn 71, whichever comes first.
– Keep checking your first-time buyer status before withdrawing for purchase.

What to expect:
– Tax-free treatment applies to withdrawals used for a qualifying first home if you still meet the rules at the time you withdraw.

Timeframe:
– The 15-year limit starts the day you open your FHSA.

6) Withdraw tax-free for your qualifying home

What you do:
– When you’re ready to buy, ask your institution how to request an FHSA withdrawal for a qualifying purchase.
– Keep paperwork that proves the purchase qualifies under CRA rules.

What to expect:
– The institution processes the withdrawal under FHSA rules.
– The CRA treats qualifying withdrawals as tax-free when rules are met.

Timeframe:
– Processing varies by institution. Ask for steps and expected timing well before closing.

7) If plans change, transfer to RRSP or RRIF

What you do:
– If you decide not to buy, transfer the FHSA funds to your RRSP or RRIF.
– Do this within 30 days of closing the FHSA to avoid taxes.

What to expect:
– Transfers to an RRSP or RRIF are tax-free. If you don’t transfer in time and withdraw cash instead, that cash can be taxed.

Timeframe:
– The 30-day window is strict. Mark it on your calendar if you switch plans.

Timeframes and milestones to track

Tax treatment at each stage

• Contributions: Tax-deductible — reduces your taxable income for the year you contribute.
• Growth: Not taxed inside the account.
• Withdrawals for a first home: Tax-free when rules are met.
• If not buying: Transfer to an RRSP or RRIF tax-free; otherwise, withdrawals may be taxed.

Opening an FHSA as soon as you qualify can help you build carry-forward room sooner, even if you can only deposit a small amount now. (Analysis by VisaVerge.com)

Common pitfalls and how to avoid them

• Waiting to open the account: Carry-forward only starts after the FHSA is opened. Even a low first deposit gets the clock going for next year’s carry-forward.
• Over-contributing: Track your yearly total carefully. The CRA’s July 2025 guidance points out that going over your room can trigger taxes on growth and other penalties.
• Missing the buying window: Set reminders for the 15-year clock and your 71st birthday year limit.
• Forgetting the transfer rule: If you won’t buy, move funds to an RRSP or RRIF within 30 days of closing the FHSA to avoid taxes.

How the FHSA fits with other programs

• The FHSA works alongside the Home Buyers’ Plan (HBP) and the First-Time Homebuyer Incentive.
• The incentive program ran until March 31, 2025, and was meant to reduce monthly mortgage payments.
• The FHSA can be one leg of a broader plan that may also include those supports, giving first-time home buyers more than one tool to reach a down payment goal.

Real-world scenarios for New Canadians

Scenario 1: Early opener with delayed contributions
– You arrived in 2023, became a resident, and opened an FHSA that year but didn’t contribute.
– In 2024, you were ready to start saving. Because carry-forward starts after opening, you could contribute up to $16,000 in 2024 ($8,000 current + $8,000 carry-forward).
– Your savings now grow tax-free, giving you a stronger base for a future down payment.

Scenario 2: Long-term planner
– You open your FHSA now with a small deposit. Even if you can’t hit $8,000 this year, the move starts your carry-forward for a larger contribution later.
– You pace your savings with your credit-building plan, while keeping home funds separate from an RRSP or TFSA.

Scenario 3: Plans change
– You opened the FHSA, saved steadily, but your family decides not to buy a home in Canada during your window.
– You transfer the FHSA balance to your RRSP or RRIF within 30 days of closing the FHSA. There’s no tax on that transfer, and the funds continue to grow for retirement.

Checklist before you withdraw for a home

• Confirm you still meet the first-time home buyer definition.
• Check your 15-year window and age limit.
• Ask your institution what documents it needs for a qualifying withdrawal.
• Keep records of your contributions and investment history.
• Verify your final contribution total to ensure you didn’t exceed your room before withdrawing.

Where to get official help

• For full rules, visit the CRA’s FHSA page: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-plans/first-home-savings-account.html
• CRA general inquiries: 1-800-959-8281
• Most major banks and investment firms offer FHSAs and have staff who can walk you through opening and withdrawals.

Policy backdrop and what’s next in 2025

The FHSA came out of the 2022 federal budget and launched on April 1, 2023 to help people save a down payment during a time of high prices. The policy idea was simple: give first-time home buyers a place to save where contributions reduce tax, growth is tax-free, and withdrawals for a first home are also tax-free. That design keeps home savings focused, without cutting into RRSP or TFSA goals.

Recent guidance in 2024–2025 confirmed that the annual contribution limit stays at $8,000 for 2025 and that only one year of unused room (up to $8,000) can be carried into a single year. This cap matters because some savers thought they could stack multiple years at once. They can’t. The rule allows up to $16,000 in a year only when you have a full $8,000 carry-forward from one prior year plus the current year’s $8,000. No changes to contribution limits or eligibility have been announced for the rest of 2025. The federal government will keep watching how the FHSA affects home buying and could consider adjustments in future budgets.

Practical planning notes for first-time home buyers

• Open early if you can, even with a small deposit. It starts your carry-forward clock.
• Keep FHSA money separate from day-to-day spending and short-term needs. This supports focused saving for your first home.
• Watch your annual total. A simple spreadsheet or note on your phone can help you stay under $8,000 for the year (unless you’re using carry-forward to reach up to $16,000).
• If your timeline shifts, remember the 15-year window and the 30-day rule for transfers to RRSP/RRIF.

What to expect during the full journey

• At the start: You confirm eligibility and open the account with your chosen institution. This is where the carry-forward clock begins.
• While saving: You add funds up to $8,000 a year (with the carry-forward rule described above), select investments, and claim deductions when you file taxes.
• Decision point: Within 15 years (or before the end of the year you turn 71), you either buy a qualifying home and withdraw tax-free, or you switch plans and transfer to an RRSP/RRIF within 30 days.
• Throughout: The CRA sets and updates the rules. Institutions handle your day-to-day account needs, while the CRA offers public guidance—most recently in July 2025—to help you avoid over-contributions and taxes on growth.

For New Canadians, the FHSA offers a clear, rule-based system to build a down payment with strong tax help. Open the account when you qualify, use your yearly room wisely, track everything, and set reminders for the 15-year and 30-day timelines. With steady steps, the FHSA can turn your first-home goal into an action plan you can follow.