Opening an FHSA and taking money out tax-free are two separate eligibility tests. A change in ownership or closing date can alter the withdrawal result. A.
Opening an FHSA and taking money out tax-free are two separate eligibility tests. A change in ownership or closing date can alter the withdrawal result.
Quick answer: FHSA qualifying withdrawal rules
A tax-free qualifying FHSA withdrawal requires meeting first-time home-buyer, residence, ownership-agreement and timing conditions, plus completing the required form before withdrawing.
What is a qualifying FHSA withdrawal?
A qualifying withdrawal lets you take eligible FHSA amounts out tax-free to buy or build a qualifying home. Ordinary FHSA withdrawals that do not meet the conditions are taxable. The bank’s willingness to release funds does not establish the withdrawal’s tax status.
Do you need to be a first-time home buyer when you withdraw?
The FHSA has a particular first-time-buyer definition for qualifying withdrawals: it focuses on whether you lived in a home you owned or jointly owned in the current year before withdrawal or any of the preceding four calendar years. The test differs in some respects from opening eligibility and involves your spouse’s home situation.
When must the home purchase or build happen?
You generally need a written agreement to buy or build a qualifying home, with acquisition or construction by the required date under the rule. There is also a restriction if you acquired the home too long before the withdrawal; the home must be your principal place of residence within the required period. Read the detailed CRA timing chart for the withdrawal year.
What happens if you own a rental property?
Owning property is not always the same as having lived in an owner-occupied qualifying home. However, residence history, ownership and your spouse’s property can affect eligibility. Do not answer the first-time-buyer question simply by checking whether your name appears on any deed.
Can spouses both withdraw from separate FHSAs?
Potentially, if each individual meets the qualifying withdrawal requirements. The home purchase may be shared, and the FHSA is not a joint account. Each holder must submit the appropriate form and meet applicable timing and residence conditions.
What if the sale falls through after the withdrawal?
A withdrawn amount is not automatically tax-free just because you intended to buy. Review whether the qualifying conditions were in fact met at withdrawal and the CRA guidance on cancelled agreements. Keep evidence of the transaction and ask the institution about correction steps before reporting.
See how it works: a realistic example
Amira and Noah intend to buy an Ontario condominium. Each has an FHSA. Before taking funds, they check their individual residence history, the signed purchase agreement, the acquisition deadline and whether they plan to occupy the home. Meeting those conditions is what matters—not their joint bank-account balance.
Quick-reference table: compare your situation
Your situation | What this means | What to do next |
Written purchase agreement and all qualifying tests met | Withdrawal may be tax-free | Complete Form RC725 before release. |
No qualifying purchase or timing failure | Withdrawal can be taxable | Consider eligible transfer instead. |
Spouse owns a home | Eligibility needs individual review | Check the precise opening and withdrawal tests. |
What to do next: five simple steps
Start with your actual facts: what is a qualifying fhsa withdrawal. Record the relevant dates, amounts and people involved.
Check the ordinary rule and eligibility: do you need to be a first-time home buyer when you withdraw. Save supporting documentation.
Consider the complication: when must the home purchase or build happen. Model the tax outcome rather than relying on an account balance.
Check exceptions and special cases: what happens if you own a rental property. Reconcile the decision with applicable CRA guidance.
Prepare for filing or the transaction: what if the sale falls through after the withdrawal. Keep a dated record and revisit the rules for the relevant tax year.
Common mistakes to avoid
Assuming a general rule covers every exception. Potentially, if each individual meets the qualifying withdrawal requirements.
Using an outdated dollar limit, tax rate or deadline without checking the exact calendar year and the person’s province.
Forgetting receipts, election forms or the separate reporting rules described in this guide.
Frequently asked questions
These short answers assume an ordinary situation. The legal details can change with the tax year, documents and family or business facts.
Do I have to repay a qualifying FHSA withdrawal?
No. It is unlike an HBP withdrawal that generally needs scheduled repayments.
Can I use FHSA with the RRSP Home Buyers’ Plan?
The programs can be combined if you satisfy each set of conditions.
Can I withdraw after I have already moved in?
There are timing limits, so verify the acquisition date before you submit the request.
Keep reading: related Presyz guides
FHSA Overcontributions and RRSP Transfers: How to Correct Errors
FHSA vs RRSP HBP vs TFSA: How to Fund a Down Payment
Official sources: verify the tax rules
How Presyz can help
Presyz is an accounting and taxation practice in Toronto. This guide is educational information based on official guidance reviewed October 28, 2026. Tax law, annual amounts and CRA administrative guidance can change before the scheduled publication date. Contact our team if you need help with the facts of your own return or business.
General educational content only. Verify current CRA and provincial guidance before acting.