Withdrawing from an FHSA

When you meet the necessary criteria for a qualifying withdrawal, you can take the entire amount out from your FHSA, tax-free.

Whether you prefer a one-time withdrawal or a series of them, the choice is yours. Keep in mind that if you're making more than one withdrawal, you'll need to submit forms and requests multiple times.

To withdraw your funds from your FHSA tax free:

• You must complete the RC725 (Request to Make a Qualifying Withdrawal) form and upload it to your account (more on this later in the article).
• You must place the withdrawal request online by logging in, going to Move money > Withdrawal, and attest that you are making the withdrawal for the purchase of a qualifying home.
• You must be a first-time home buyer (see below).
• You must have a written agreement to buy/build a qualifying home with the acquisition or construction completion date of the home before October 1 of the year after the date of the withdrawal.
  • This rule ensures that you’re withdrawing a reasonable amount of time before your purchase/build, and not several years in advance.
• You must not have acquired the qualifying home more than 30 days before making the withdrawal.
  • In other words, you have up until 30 days after your closing date to make qualifying withdrawals.
• You must be a resident of Canada from the time that you make your first qualifying withdrawal from one of your FHSAs until the acquisition of the qualifying home.
• You must occupy or intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

If you’ve accidentally over contributed to your FHSA, you’re able to request a designated withdrawal of only the excess amount you’ve contributed.

If you continue to hold more in your FHSA than your participation room allows, you will have to pay a tax of 1% per month on the highest excess FHSA amount in that month. You will also continue to pay the monthly 1% tax until the excess amount is eliminated.

If the excess amount came from an RRSP to FHSA transfer and not a new contribution, this must be transferred back to an RRSP instead of being withdrawn directly.

Please explore the CRA’s page for more information.

If you decide to withdraw funds from your FHSA account, and your withdrawal does not meet the criteria to be a qualifying withdrawal, this withdrawal is taxable.

The gross amount of the withdrawal will be reported as income in the tax year in which it is withdrawn, and a withholding tax will be withheld on the amount (similar to an RRSP).

Please note that this withholding tax may or may not completely cover any potential future taxes arising from the income inclusion; this depends on your total overall level of taxable income and other factors like deductions, credits, and etc.

Please check with a tax professional about your specific circumstances, or if you have any questions about the tax implications of a non-qualifying FHSA withdrawal.

Review the chart below to determine how the gross amount of your withdrawal will be taxed:

Withholding Tax Thresholds

Withholding taxes for Quebec residents include both the CRA and Revenu Quebec withholding amounts combined.

¹Represents the CRA withholding amount. ²Represents the Revenu Quebec withholding amount.

The tax withheld may not always be enough to account for the tax you owe for your tax bracket. You may be asked to pay more on the withdrawal when you include the withdrawal on your income tax and benefit return for that year.

For USD withdrawals: The withholding tax rate “tier” used is based on the CAD equivalent of the USD withdrawal amount.

To withdraw your funds from your Questrade FHSA, whether it's a qualifying withdrawal or non-qualifying withdrawal, you must submit a request first.

To learn more on how to complete a withdrawal request read our article here.

For Qualifying withdrawals:

After your request is submitted on the Withdrawal page, you will need to fill out the RC725 (Request to Make a Qualifying Withdrawal from your FHSA) form and upload it.

To upload, complete the following:

1. Go to the Documents page and click Upload documents.
2. Upload the RC725 form and choose FHSA Qualifying Withdrawal Form as the document type.

Your request will be processed within 3-5 business days. To learn more about how to upload your withdrawal request form read our article here.

For Non-qualifying withdrawals:

After you submit your request, the funds will have withholding taxes applied (see above), and the net amount of your withdrawal will be processed.

Note: The information in this blog is for educational purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied, is made by Questrade, Inc., its affiliates or any other person to its accuracy.