FHSA Withdrawal Rules: How to Take Your Money Out Tax-Free

You've spent months or years contributing to your First Home Savings Account, watching the tax deductions hit your return each spring. Now you're actually buying a home in Alberta. The question every buyer asks at this stage is the same: how do I actually get the money out, and are there rules that could blow up the tax-free treatment?

The short answer is yes — the FHSA has specific withdrawal conditions, and getting them wrong converts a tax-free withdrawal into fully taxable income.

The Two Conditions That Make a Withdrawal Qualifying

The Canada Revenue Agency defines a "qualifying withdrawal" from an FHSA as one that meets all of the following tests simultaneously:

1. You are a first-time home buyer at the time of withdrawal. The CRA definition of first-time buyer looks back four calendar years. If you or your spouse or common-law partner owned a home that you lived in at any point during the current year or the preceding four calendar years, you do not qualify. This is the same four-year window used for the RRSP Home Buyers' Plan — not the colloquial definition of "I've never owned a home before."

2. You have a written agreement to buy or build a qualifying home. You must have a signed purchase contract (or construction agreement) before you submit your withdrawal request to your financial institution. You cannot withdraw in anticipation of eventually finding a property — the paper commitment must exist first.

3. The home will be your principal residence within one year. You must intend to occupy the qualifying home as your principal place of residence no later than one year after buying or building it. Investment properties and homes you plan to rent out entirely do not qualify.

4. You haven't previously made a qualifying FHSA withdrawal. The FHSA is a one-time vehicle. Once you've made qualifying withdrawals to purchase a home, the account must be closed within one year of the first qualifying withdrawal. You cannot reopen eligibility by returning the funds.

Filing Form RC725

To execute a qualifying withdrawal, you submit CRA Form RC725 — Request to Make a Qualifying Withdrawal from Your FHSA — to your financial institution. Your institution will then issue a T4FHSA slip, which you must report on your income tax return for the year of withdrawal. A qualifying withdrawal is reported but does not add to your taxable income — it flows through tax-free.

Your financial institution needs the following information:

• Your Social Insurance Number
• The address of the qualifying home
• Confirmation that you meet the first-time buyer test
• The written agreement to buy or build

Keep a copy of your purchase contract in your records. The CRA can audit FHSA withdrawals, and you need documentation to support the qualifying nature of your withdrawal.

Timing Your Withdrawal Relative to Closing

You can submit your withdrawal request as soon as you have a signed purchase contract. You do not need to wait until possession day.

Most buyers submit their RC725 once their financing condition has been removed (typically 7 to 10 days after accepted offer in Alberta). Your institution may take several business days to process the withdrawal, so submit early to ensure funds are in your account before your lawyer requests the closing balance.

If your purchase falls through after you've already withdrawn FHSA funds but before possession, the CRA has a limited recontribution window. You can recontribute the withdrawn amounts to your FHSA without affecting your lifetime contribution room — but only if you do so before December 31 of the year following the withdrawal, and provided your agreement was cancelled and you did not acquire the home.

What Happens If You Miss the First-Time Buyer Test

The most common scenario that derails an FHSA withdrawal is a prior period of homeownership that the buyer forgot about or didn't realize counted.

Examples that can catch buyers:

• You owned a condo for two years in your mid-20s, sold it, and assumed the four-year window had reset — but you haven't actually waited the full four calendar years since you last occupied it
• You were on title for a home owned jointly with a former spouse
• You owned a home outside Canada that you lived in

If the four-year test is not met, your withdrawal is non-qualifying. A non-qualifying withdrawal is added to your taxable income in full. On a $40,000 withdrawal at a 40% marginal rate, that's a $16,000 unplanned tax bill.

Stacking with the Home Buyers' Plan

The FHSA and the RRSP Home Buyers' Plan can be used together on the same purchase. The HBP allows an additional $60,000 per individual (as of 2024) in RRSP withdrawals — also tax-free if the conditions are met — but with a mandatory 15-year repayment schedule back into your RRSP.

A couple maxing out both programs can assemble up to $200,000 in registered-account funds for a single home purchase: $80,000 from two FHSAs ($40,000 each) plus $120,000 from two RRSPs under the HBP ($60,000 each).

The key difference: FHSA withdrawals have no repayment obligation. HBP withdrawals must be repaid or the unpaid balance is added to your taxable income each year.

If you're building your strategy now and haven't maxed out your FHSA yet, prioritize it over the HBP. The tax-free withdrawal with no repayment clock is the more favourable instrument.

After Your Withdrawal: Closing the Account

Once you've made qualifying withdrawals and purchased your home, you have until December 31 of the year following your first qualifying withdrawal to close the account. Any remaining balance in the FHSA at that point must be transferred to an RRSP or RRIF (which preserves your RRSP contribution room), or withdrawn as taxable income.

You cannot keep the FHSA open indefinitely after buying a home. The CRA enforces the closure requirement strictly.

Getting the Full Alberta Context

The FHSA rules outlined here are federal — they apply the same way whether you're buying in Edmonton, Calgary, or anywhere else in Canada. Where Alberta differs is in the surrounding cost structure: no provincial land transfer tax, low title registration fees, and access to programs like Attainable Homes Calgary or the Edmonton First Place program that interact with your registered-account strategy.

The Alberta First-Time Home Buyer Guide walks through how the FHSA and HBP fit into the full Alberta closing cost picture, including how to time your withdrawals relative to the AREA contract's 12-noon possession deadline and how to coordinate with your lawyer during the Western Conveyancing Protocol.

See more Alberta guides →