Tax Tip - Make the most of your first home savings account Français

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Canada Revenue Agency

Jul 22, 2025, 09:01 ET

OTTAWA, ON, July 22, 2025 /CNW/ - A First Home Savings Account (FHSA) lets you save for a qualifying home with tax-free growth and tax-deductible contributions, making it a great option for potential first-time home buyers.

But, it's important to make sure you don't put too much into your FHSA. If you do, part of the tax-free growth you're generating could end up going toward taxes anyway!

Here are some tips for how you can make the most of your FHSA and avoid any costly errors:

Make sure you're eligible

  • FHSAs are intended for people who are saving for their first home – it's right in the name! You can only open an account if you're an adult resident of Canada and a first-time home buyer.
    • Pro tip: To be considered a first-time home buyer, you can't have lived in a home you owned, or shared ownership of, in the past four years. If you have a spouse or common-law partner, you can't have lived in a home they own either.

Understand your participation room

  • Participation room is the total amount your FHSA can hold in a given year. When you open your first FHSA, your participation room is $8,000.
    • Pro tip: Unlike a tax-free savings account, your FHSA participation room only starts when you officially open your first account through your financial institution.
  • You can participate in your FHSA by making contributions from your income or other sources, or you can make transfers from your registered retirement savings plan (RRSP).
    • Pro tip: No matter how you choose to participate, the maximum participation room in your account for the first year is $8,000.
  • Each year after your account was opened, you will get another $8,000 of participation room, as long as you stay within your limit each year. The lifetime limit for FHSAs is $40,000. If you don't end up using all of your participation room for that year by December 31, you may be able to use it the following year.
  • You can open more than one FHSA, but having more than one account doesn't mean you get extra participation room. The total room across all your FHSAs will still be $8,000 in the first year, followed by an additional $8,000 each following year, as long as you stay within your limit, up to a lifetime maximum of $40,000.
  • Once you open your first FHSA and file your taxes for that year, you will get a statement on your notice of assessment that lets you know how much participation room you have. You can also find this statement in your CRA account.

Don't over-participate

  • Over-participation is what happens when you contribute or transfer more into your FHSA(s) than your participation room for that year.
    • Pro tip: Any amount that exceeds your participation room is called an "excess amount" and it may be taxed.
  • If you over-participate, it affects your participation room for the following year. Any excess amounts will reduce your participation room for the next year. For example, if you opened an FHSA in 2024 and contributed $10,000, your participation room for 2025 will only be $6,000.
  • Don't wait! You will have to pay tax on any excess amount you have in your FHSA every month. Take swift action to resolve the issue – don't let your growth be impacted by taxes! More on this below.

Fix your over-participation as soon as possible

  • If you made contributions from your income or other sources to your FHSA, you can make a designated withdrawal to reduce the excess and get your account back within the annual limit. 
    • Pro tip: To make a designated withdrawal, fill out form RC727 and give it to your financial institution. 
  • If you transferred into your FHSA from your RRSP, you can make a designated transfer to return the excess amount to your RRSP. 
    • Pro tip: To make a designated transfer, you also need to fill out form RC727 and give it to your financial institution.
  • You can also remove the excess from your FHSA by withdrawing that amount, but when you do this, it will be considered a taxable withdrawal. Just like it sounds, that means you have to pay income tax on the amount you remove, because it is now considered income.
  • If you have an excess FHSA amount, you have to report it by filling out form RC728 and form RC728-SCH-A. This will determine how much tax you need to pay. If you don't file these forms on time, the CRA may send you a notice of assessment.
    • Pro tip: Sign up for email notifications in your CRA account to get notified every time the CRA sends you mail.

Use the Canada Revenue Agency's FHSA estimators

There are two FHSA estimators. The first gives you an idea of how much you could save for a down payment, including possible investment growth. The second looks at your potential tax savings, based on your yearly taxable income and province or territory of residence. The estimators have built-in limits to reflect the annual participation room of $8,000 and the $40,000 lifetime limit. These are great tools to try out when planning your FHSA participation.

Looking for more information?

  • FHSA statistics for 2023 are available on Canada.ca, including how many people opened accounts, the average balance, and the total value of all active accounts. Data for the 2024 tax year is being processed and will be added to this page when available.
  • For more details on how FHSAs work, visit First Home Savings Account on Canada.ca.

Contacts

Media Relations
Canada Revenue Agency
613-948-8366
[email protected]

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SOURCE Canada Revenue Agency

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Canada Revenue Agency

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Government of Canada