FHSA contributions

Last updated: August 1, 2025 | Reviewed by Paul Thorne

You’ve taken an exciting step by opening a First Home Savings Account (FHSA) – now it’s time to make the most of it.

To make the most of it, you’ll want to understand how much you can contribute, how to maximize tax benefits, and what happens if you go over the limit.

How much can I contribute to an FHSA?

The Canadian government sets clear limits on how much you can contribute annually and throughout your lifetime to your FHSA.

  • Annual FHSA contribution limit:
    • You can contribute up to $8,000 per year.
    • If you don’t use your full contribution limit in one year, you may be able to carry forward unused FHSA contribution to increase your contribution in future years.
  • Lifetime contribution limit: The maximum lifetime limit is $40,000.

Tax deductions for FHSA contributions

When you deduct your FHSA contributions from your total income, you reduce your taxable income. This may lower the amount of tax you owe or lead to a refund, which you can then use to help buy your first home.

The money you save in taxes can be redirected toward additional savings for:

  • Increasing your down payment
  • Paying for closing costs
  • Furnishing your new place

The following example assumes typical tax rates for someone earning $75,000 in Ontario. Your tax benefits may vary based on your individual circumstances.

  • Ontario taxpayer earning $75,000 a year.
  • Marginal tax rate (combined federal and provincial): 29.65%.  

If you contribute $8,000 to your FHSA and deduct it from your total income, you save roughly $2,372 on your taxes ($8,000 x 29.65%).

Instead of paying that $2,372 to the government, that money can go directly toward your home purchase.

What happens if I over-contribute to my FHSA?

An over-contribution (also called an excess contribution) occurs when you contribute more to your FHSA than your annual FHSA limit.

You’ll be charged a 1% tax penalty per month on any over-contribution.

The penalty continues until you make a:

You can also wait to deduct the excess in the following years if you have new unused FHSA contribution room that covers the over-contribution. Remember, if you choose to wait until January 1 of the following year for new contribution room, the 1% monthly penalty continues to apply until you earn sufficient contribution room.

Learn more about removing FHSA excess on the Government of Canada’s website

Before making a designated withdrawal

1. Fill out all the necessary information on Form RC727: This form is called “Designate an Excess FHSA Amount as a Withdrawal from your FHSA or as a Transfer to your RRSP or RRIF.”

Download Form RC727

2. Check your excess amount: Make sure the amount you want to withdraw doesn’t exceed the current excess in your FHSA.

3. Submit the form: Once completed, submit it to your FHSA issuer to make the withdrawal.

Remember: You can only withdraw up to the amount of excess funds in your FHSA at the time you make the designation. This helps ensure you’re not withdrawing more than what’s considered “extra” in your account.

Sarah is 29 and works full-time in downtown Vancouver. She opened an FHSA to save for her first condo, setting up automatic deposits each month. By August, she’d already reached the full annual limit of $8,000 without realizing it.

In September, she received a work bonus and deposited an extra $500 into her FHSA – unaware she’s exceeded her limit.

That additional $500 is now an over-contribution. It’s subject to a monthly 1% tax penalty, which works out to $5 per month ($500 x 1% = $5) until Sarah deals with it.

How can Sarah fix her over-contribution? She has a few options:

  • Pause her automatic deposits immediately: Pausing her automatic deposits to prevent more over-contribution in her FHSA.
  • Make a taxable withdrawal: She can remove the $500 immediately and stop the monthly penalty.
  • Make a designated withdrawal: Under certain conditions, a designated withdrawal may help avoid extra taxes on that withdrawal itself.
  • Wait for the next year’s FHSA contribution room: If she expects more contribution room in January, she could leave the over-contribution in place – though she’d keep incurring the monthly 1% tax penalty until her new FHSA room covers the excess.

Note: If Sarah overcontributed to her FHSA by transferring funds from an RRSP or RRIF, she has one more option:

  • Transfer the excess directly to an RRSP or a RRIF: This only applies if the funds originally came from an RRSP or RRIF. She can fill out a Form RC727 to move the over-contribution into an RRSP or a RRIF which can help limit penalties.

Learn more about removing FHSA excess on the Government of Canada’s website

Frequently asked questions

FHSA contributions must be made by December 31 of the current calendar year, if you want to claim them on that year’s tax return.

Don’t wait until December 31 though. Keep in mind you need to have an FHSA open with your financial institution to earn contribution room, which may take a few days to set up.

Yes, you can. The maximum FHSA contribution room you can carry forward to a subsequent year is $8,000. This means that your total FHSA contribution room will never exceed more than $16,000 in any given year.

Example scenario:

If you contribute $5,000 this year, the unused $3,000 carries forward to next year. This means next year, your contribution limit would be $11,000 ($8,000 annual limit plus the $3,000 unused amount).

FHSA Carry-forward rules:

You can carry forward unused contribution room – but only from the years after you open your account, up to $8,000 per year. Unused contribution room lasts until you need to close your FHSA.

Yes. If both you and your partner qualify as first-time homebuyers, you can each open your own FHSA and individually contribute up to $8,000 per year.

You must open an account first to earn contribution room for the year. All cash contributions you make directly to your FHSA count toward your annual and lifetime limits. Transfers from an RRSP to an FHSA also count against your limit.

Yes. You can contribute the full annual contribution limit of $8,000.

Parents can’t contribute directly to their adult child’s FHSA. But they can gift the money to their adult children, who can then use it to contribute to their FHSA.

Their adult children then get a tax deduction for those contributions.

Some financial institutions may require a letter confirming that the parents gifted a certain amount of money and don’t require any repayment from their adult children.

No. An exemption from the attribution rule applies to funds you gift to your spouse to contribute to their FHSA. There’s generally no attribution on funds gifted to an adult child.

FHSA contributions reduce your net income, potentially increasing your eligibility for income-tested benefits like the Canada Child Benefit.

Compare the FHSA

FHSA vs HBP

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Learn more about FHSA vs HBP

FHSA vs RRSP

Both offer tax advantages, but which one fits your savings goals better?

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FHSA vs TFSA

They both grow your money tax-free – but they’re built for different goals.

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More resources

Buying a house: What happens after your offer is accepted?

You've found your new house and your offer was accepted. What comes next?

What to do before you move in

A 4-step guide to saving for your first home

Want to know how to save for a down payment on a house in Canada?

How to save for a down payment

6 Benefits of FHSAs

Buying a home for the first time and considering an FHSA?

6 benefits of FHSAs you should know

This information is meant for educational and illustrative purposes only. Some conditions, exclusions and restrictions apply.

Each dollar you put in can help you move closer to your first home. A Sun Life advisor will walk you through opening an FHSA, from the first deposit to your dream front door.

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