FHSA Qualifying Withdrawal Rules 2026

What Is a Qualifying FHSA Withdrawal?

A qualifying FHSA withdrawal is the tax-free withdrawal of FHSA funds for the purpose of purchasing or building a first home in Canada. Unlike the RRSP Home Buyers' Plan, there is no repayment obligation and the full amount (including growth earned inside the FHSA) is withdrawn completely tax-free.

To make a qualifying withdrawal, you must complete Form RC725 (Request to Make a Qualifying First Home Savings Account (FHSA) Withdrawal) and submit it to your FHSA issuer before making the withdrawal.

The October 1 Deadline Rule

One of the most important — and most misunderstood — FHSA withdrawal rules is the October 1 condition. You can make a qualifying FHSA withdrawal in a given calendar year if you have a written agreement (purchase and sale agreement, or construction agreement) to buy or build a qualifying home, and the closing/completion date is before October 1 of the calendar year following the withdrawal.

Example: You make a qualifying FHSA withdrawal on August 15, 2026. Your purchase agreement must specify a closing date before October 1, 2027. If your purchase closes December 15, 2027, you are outside the window and the withdrawal will not qualify — it will be added to your taxable income.

First-Time Buyer Definition for FHSA

For FHSA purposes, a "first-time home buyer" means you (and your spouse or common-law partner) did not own and occupy as a principal residence any home at any time during:

• The current calendar year (before the time of the qualifying withdrawal), and
• The preceding four calendar years

This is the same four-year lookback used for the RRSP Home Buyers' Plan. Importantly, owning a rental property you never lived in does NOT disqualify you. The test is whether you owned and occupied a home as your principal residence.

Separation and Re-Qualification

If you previously owned a home with a spouse but have been separated for at least 90 days before making the FHSA withdrawal, you may re-qualify as a first-time buyer even if you previously owned a home — provided all other conditions are met and the separated spouse is not listed as a co-owner on the FHSA withdrawal home.

What Is a "Qualifying Home"?

A qualifying home must be located in Canada and be a housing unit — including:

• Single-family home, semi-detached, townhouse
• Condominium unit
• Mobile home, modular home, floating home
• A share in a housing co-operative
• A home being constructed (as long as it will qualify once complete)

The home must be your principal residence — you must intend to occupy it as your main home within one year of buying or building. Vacation properties, investment properties, and homes you do not intend to live in do not qualify.

Non-Qualifying Withdrawals: Tax Consequences

If you withdraw funds from your FHSA without meeting all qualifying withdrawal conditions, the withdrawal is a taxable FHSA withdrawal. Your FHSA issuer will withhold tax (at the same rates as RRSP withdrawals) and issue a T4FHSA slip. The full amount is added to your taxable income for the year.

FHSA Withdrawals and the New Home Construction Timeline

If you are building a home rather than buying an existing one, the timing rules are slightly more flexible. You can make a qualifying FHSA withdrawal before construction is complete if:

• You have a written construction agreement with a builder
• The home is expected to be habitable and you intend to occupy it as principal residence within one year of the withdrawal
• The expected completion/occupancy date is before October 1 of the following year

Multiple FHSA Withdrawals in One Purchase

You can make multiple qualifying withdrawals in a single calendar year (from the same or multiple FHSA accounts) for the same home purchase, as long as each withdrawal meets the qualifying conditions. All qualifying withdrawals for the same home must relate to the same purchase agreement.