What happens if you contribute or transfer too much to your FHSAs
You may need to pay taxes if you contribute or transfer more to your first home savings accounts (FHSAs) than your FHSA participation room for the year allows. Learn about how much tax you will be charged if you have an excess FHSA amount and the different ways to reduce or eliminate your excess FHSA amounts.
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What is an excess FHSA amount
You may have an excess FHSA amount if the total of your contributions to your FHSAs and transfers from your registered retirement savings plans (RRSPs) to your FHSAs in a year are more than your FHSA participation room for that year.
How to calculate your excess FHSA amount
Your excess FHSA amount at a particular time of the year is calculated as follows:
- your excess FHSA amount at the end of the prior year
- +plus all your contributions to your FHSAs and transfers from your RRSPs to your FHSAs in the year, up to that time
- -minus all your designated amount in the year, up to that time
- -minus all your taxable withdrawals from your FHSAs in the year, up to that time
- -minus all amounts deemed received by you on the cessation of your FHSAs in the year, up to that time
- -minus your unused FHSA participation room at the end of the prior year
- -minus the lesser of:
- $8,000
- plus your FHSA participation room carryforward for the year
- $40,000
- minus all of your contributions to your FHSAs and transfers from your RRSPs to your FHSAs for all prior years up to the end of the prior year
- plus all of your designated amounts for all prior years up to the end of the prior year
- plus the total of the following calculation for each prior year :
the portion of your taxable withdrawals from your FHSAs or the amounts deemed received by you on the cessation of your FHSAs that would have reduced or eliminated your excess FHSA amount in the particular year - plus your total FHSA re-participation room used up to the end of the prior year
- plus your excess FHSA amount at the end of the prior year
*If the results of this calculation is negative, use $0.
Example – Calculating your excess FHSA amount
Ridwan opens his first FHSA in March 2024. Ridwan’s FHSA participation room for 2024 is $8,000 because this is the first year he opens an FHSA.
On April 10, 2024, Ridwan transfers $7,500 from his RRSP to his FHSA. He also contributes $2,000 to his FHSA on the same day.
Ridwan’s total contributions and transfers to his FHSAs is $9,500, which is more than his $8,000 FHSA participation for 2024. This creates an excess FHSA amount of $1,500 on April 10, 2024.
- $0 (excess FHSA amount at the end of 2023)
- +plus $9,500 ($7,500 transfer + $2,000 contribution)
- -minus $0 (designated amounts up to April 2024)
- -minus $0 (taxable withdrawals up to April 2024)
- -minus $0 (amounts deemed received on cessation of FHSAs up to April 10, 2024)
- -minus $0 (unused FHSA re-participation room at the end of 2023)
- -minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $1,500 (Ridwan’s excess FHSA amount as of April 10, 2024)
In May 2024, Ridwan finds out that he has an excess FHSA amount. In an effort to resolve his excess FHSA amount, Ridwan fills out Form RC727, Designate an Excess FHSA Amount as a Withdrawal from your FHSA or as a Transfer to your RRSP or RRIF, to make a designated withdrawal of $1,500 and gives it to his financial institution. The designated withdrawal is completed on May 15, 2024.
Ridwan’s designated withdrawal of $1,500 eliminates the excess FHSA amount as of May 15, 2024.
- $0 (excess FHSA amount at the end of 2023)
- +plus $9,500 ($7,500 transfer + $2,000 contribution)
- -minus $1,500 (designated amounts up to May 15, 2024)
- -minus $0 (taxable withdrawals up to May 15, 2024)
- -minus $0 (amounts deemed received on cessation of FHSAs up to May 15, 2024)
- -minus $0 (unused FHSA re-participation room at the end of 2023)
- -minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $0 (Ridwan’s excess FHSA amount as of May 15, 2024 (after the designated withdrawal))
Ridwan is aware that he will have to pay a 1% tax on the highest excess FHSA amount for each of the months of April and May. He also has to file Forms RC728, First Home Savings Account (FHSA) Return, and RC728-SCH-A Schedule A, Excess FHSA Amounts, to report and pay the tax on his excess FHSA amount.
In order to properly calculate your excess FHSA amount, you have to know some of the terms that are used in the calculation. Refer to the sections below to understand what the different variables mean and how to calculate them.
FHSA re-participation room
The portion of your taxable withdrawals or the amounts deemed received by you when your account loses its status as an FHSA that did not reduce or eliminate your excess FHSA amount is referred to as your FHSA re-participation room. This is amount is added in the calculation of your FHSA participation room .
The portion of your FHSA re-participation room that you used up by making contributions or transfers to your FHSAs is called your total FHSA re-participation room used.
For more information about calculating your used and unused FHSA re-participation room, go to How to calculate your FHSA participation room.
FHSA participation room carryforward
Your FHSA participation room carryforward is the amount you are permitted to carryforward for the purposes of your FHSA participation room and the calculation of your excess FHSA amounts.
This is different from your FHSA carryforward which is used to calculate your annual FHSA limit and how much you can claim as an FHSA deduction.
For more information about calculating your FHSA participation room carryforward, go to How to calculate your FHSA participation room.
Tax on excess FHSA amounts
Generally, you have to pay a tax of 1% per month on the highest excess FHSA amount in that month. You will continue to pay the monthly 1% tax until the excess FHSA amount is eliminated. Your excess FHSA amount will be reduced or eliminated by your new FHSA participation room (on January 1 of the following year), or by removing amounts from your FHSAs.
If you have an excess FHSA amount, you must file Form RC728, First Home Savings Account (FHSA) Return, and Form RC728-SCH-A Schedule A, Excess FHSA Amounts, to report your excess FHSA amount and determine the amount of tax payable. For more information about the RC728 return and when it will have to be filed, go to FHSA taxes payable, assessments, and reassessments.
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Example – Contributing and transferring too much to an FHSA
Cole heard on the news that individuals can open an FHSA beginning in April 2023. However, he did not know that he could only contribute to his FHSAs and transfer from his RRSPs to his FHSAs up to a maximum of $8,000 in 2024, which is the FHSA participation room for the year you open your first FHSA.
In December 2024, Cole opened an FHSA. He decided to immediately transfer $5,000 from his RRSP to his FHSA and to make a $6,000 contribution to his FHSA.
Cole’s total transfers and contributions to his FHSA was $11,000, which is more than his $8,000 FHSA participation room for 2024. This created an excess FHSA amount of $3,000 for December 2024.
- $0 (excess FHSA amount at the end of 2023)
- +plus $11,000 ($5,000 transfer + $6,000 contribution)
- -minus $0 (designated amounts up to December 2024)
- -minus $0 (taxable withdrawals up to December 2024)
- -minus $0 (amounts deemed received on cessation of Cole’s FHSAs up to December 2024)
- -minus $0 (unused FHSA re-participation room at the end of 2023)
- -minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $3,000 (Cole’s excess FHSA amount as of December 2024)
Tax owing on Cole's excess FHSA amount for 2024 Month Tax payable December $3,000 x 1% = $30 Cole has to pay a tax of 1% on the highest excess FHSA amount for that month, which is $30.
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Example – Excess FHSA amount eliminated by future FHSA participation room
Carolyn opened an FHSA and contributed $10,000 to her FHSA on November 15, 2024. Since Carolyn contributed more than her FHSA participation room of $8,000 for 2024, she had an excess FHSA amount of $2,000. Carolyn did not make any other transactions in her FHSA for the remainder of the year.
- plus $0 (excess FHSA amount at the end of 2023)
- +plus $10,000 (contribution on November 15, 2024)
- -minus $0 (designated amounts as of November 15 up to the end of 2024)
- -minus $0 (taxable withdrawals as of November 15 and up to the end of 2024)
- -minus $0 (amounts deemed received on cessation of the FHSAs as of November 15 up to the end of 2024)
- -minus $0 (unused FHSA re-participation room at the end of 2023)
- -minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $2,000 (Carolyn’s excess FHSA amount as of November 15, 2024, and at the end of 2024)
Carolyn only became aware of her excess FHSA amount in January 2025 when she realized that her FHSA participation room for 2025 was only $6,000. For more information on calculating your FHSA participation room, go to How to calculate your FHSA participation room.
- $0 (unused FHSA re-participaton room at the end of 2024)
- +plus$8,000 ($8,000 + $0 FHSA participation room carryforward for 2025)
- –minus$2,000 (excess FHSA amount at the end of 2024)
- =eqauls $6,000 (FHSA participation room for 2025)
Carolyn filed Form RC728, First Home Savings Account (FHSA) Return, and Form RC728-SCH-A Schedule A, Excess FHSA Amounts, to report her excess FHSA amount and determined that her tax payable on the excess FHSA amount for 2024 was as follows:
Tax owing on Carolyn's excess FHSA amount for 2024 Month Tax payable November $2,000 x 1% = $20 December $2,000 x 1% = $20 Total tax payable on her excess FHSA amount for 2024 is $40.
- plus $20
- xplus 2 months
- =eqauls $40
Carolyn did not have an excess FHSA amount at the beginning of 2025, because her excess FHSA amount at the end of 2024 was eliminated by her new FHSA participation room for 2025.
- $2,000 (excess FHSA amount at the end of 2024)
- -minus$0 (unused FHSA re-participation room at the end of 2024)
- -minus$8,000 ($8,000 + $0 FHSA participation room carryforward for 2025)
- =eqauls $0 (excess FHSA amount at the beginning of 2025)
Removing excess FHSA amounts
An excess FHSA amount can be reduced or eliminated by any of the following:
- Making a withdrawal of a designated amount from your FHSAs (designated withdrawal)
- Making a direct transfer of a designated amount from your FHSAs to your RRSPs or RRIFs (designated transfer)
- Making a taxable withdrawal from your FHSA
- Any amounts deemed to be included in income if the account loses its status as an FHSA
Designated withdrawals and transfers
It is important to note that a designated amount is limited to the excess FHSA amount at the time of the designation. You are not able to designate an amount if you do not have an excess FHSA amount.
If you make a designated withdrawal, the amount of the withdrawal is not required to be included as income on your income tax and benefit return of that year.
If you make a designated transfer, the amount of the transfer is not required to be included as income on your income tax and benefit return of that year. A designated transfer will not impact your unused RRSP deduction room .
Taxable withdrawals
If you make a taxable withdrawal, the amount withdrawn must be included as income on your income tax and benefit return for the year received. For more information on taxable withdrawals, go to Withdrawals and transfers out of your FHSAs.
How to make a designated withdrawal or designated transfer
In order to make a designated withdrawal or designated transfer you must fill out Form RC727, Designate an Excess FHSA Amount as a Withdrawal from your FHSA or as a Transfer to your RRSP or RRIF and give it to your FHSA issuer .
If you only made contributions to your FHSAs up to the date of designation:
- You can only make a designated withdrawal to reduce or eliminate your excess FHSA amount.
- You cannot make a designated transfer.
If you only made transfers from your RRSPs to your FHSAs up to the date of designation:
- You can only make a designated transfer to reduce or eliminate your excess FHSA amount.
- You cannot make a designated withdrawal.
If you made both transfers from your RRSPs to your FHSAs and contributions to your FHSAs:
- You can make a designated withdrawal or designated transfer to reduce or eliminate your excess FHSA amount, with certain restrictions.
The amount of your designated withdrawal cannot exceed the total amount of contributions to your FHSAs as of the date of designation minus the total amount of any previously designated withdrawals.
The amount of your designated transfer cannot exceed the total amount of transfers to your FHSAs as of the date of designation minus the total amount of any previously designated transfers.
Depending on your situation, you may be required to make both a designated withdrawal and a designated transfer to eliminate your excess FHSA amount.
Your FHSA issuer will give you a T4FHSA slip, First Home Savings Account Statement showing the total amount of designated transfers from your FHSAs to your RRSPs in box 36 and the total amount of designated withdrawals from your FHSAs in box 38. For more information on reporting your FHSA activities to the CRA, go to Reporting FHSA activities on your income tax and benefit return.
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Example – Making a designated withdrawal
Cristina opens her first FHSA on April 5, 2024 and has $8,000 of FHSA participation room for 2024. Cristina contributes $8,000 to her FHSA on that same day. On July 6, 2024, forgetting about the contribution that she made in April, she contributes another $7,000 to her FHSA. On November 1, 2024, she finds out that she has an excess FHSA amount of $7,000 and must pay a 1% tax on the $7,000 for each month that the excess FHSA amount remains in her FHSA.
- plus $0 (excess FHSA amount at the end of 2023)
- +plus $15,000 (contributions to the FHSA and transfers to the FHSA up to November 1, 2024)
- –minus $0 (designated amounts up to November 1, 2024)
- –minus $0 (taxable withdrawals up to November 1, 2024)
- –minus $0 (amounts deemed received on cessation of the FHSA up to November 1, 2024)
- –minus $0 (unused FHSA re-participation room at the end of 2023)
- –minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $7,000 (Cristina's excess FHSA amount as of November 1, 2024)
On November 2, 2024, Cristina immediately goes to her financial institution to find out how to eliminate her excess FHSA amount of $7,000 so that she can avoid paying the 1% tax for December 2024. She asks her financial institution if she can make a designated transfer of $8,000 to her RRSP. She is advised that since she only made contributions to her FHSA, she is not permitted to make a designated transfer and she must make a withdrawal from her FHSA. Cristina is worried that the withdrawal from her FHSA will be taxable and that it must be included as income on her income tax and benefit return for the year received.
The financial institution explains that making a designated withdrawal is tax-free. The designated withdrawal will not be included as income on her income tax and benefit return for the year received. Cristina is relieved to hear this and fills out the form to complete the designated withdrawal to remove her excess FHSA amount.
Cristina is aware that she will have to pay a 1% tax on the highest excess FHSA amount for each of the months of July, August, September, October, and November 2024. She must also file Form RC728, First Home Savings Account (FHSA) Return, and Form RC728-SCH-A Schedule A, Excess FHSA Amounts, to report and pay the tax on her excess FHSA amount.
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Example – Making a designated transfer
On May 4, 2024, Bailey goes to her financial institution and opens her first FHSA. Bailey has $8,000 in FHSA participation room for 2024. Bailey transfers $8,000 from her RRSP with Bank A to her FHSA on May 8, 2024, and transfers another $5,000 from her RRSP with Bank B to her FHSA on July 7, 2024. On August 18, 2024, Bailey realizes that she made a mistake and transferred too much to her FHSA. On the same day, she goes to her financial institution to tell her financial advisor that she needs to remove her excess FHSA amount of $5,000.
- plus $0 (excess FHSA amount at the end of 2023)
- plus $13,000 (contributions to the FHSA and transfers to the FHSA up to August 18, 2024)
- –minus $0 (designated amounts up to August 18, 2024)
- –minus $0 (taxable withdrawals up to August 18, 2024)
- –minus $0 (amounts deemed received on cessation of the FHSA up to August 18, 2024)
- –minus $0 (unused FHSA re-participation room at the of 2023)
- –minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $5,000 (Bailey's excess FHSA amount as of August 18, 2024)
Since Bailey only made transfers to her FHSA, if she wants to remove the excess FHSA amount without having to include the amount as income on her income tax and benefit return, she needs to make a designated transfer from her FHSA. Bailey asks whether she is required to transfer $5,000 back to her RRSP with Bank B. The financial institution informs her that she can make the designated transfer to any of her RRSPs. Bailey chooses to transfer $5,000 as a designated transfer from her FHSA to her RRSP with Bank A. She fills out the form and her financial institution completes the direct transfer from her FHSA to her RRSP with Bank A.
Bailey is aware that she will have to pay a 1% tax on the highest excess FHSA amount for each of the months of July and August 2024. She must also file Form RC728, First Home Savings Account (FHSA) Return, and Form RC728-SCH-A Schedule A, Excess FHSA Amounts, to report and pay the tax on her excess FHSA amount.
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Example – Excess FHSA amount due to contributions and transfers
On April 11, 2024, Derek goes to his financial institution and opens his first FHSA. Derek has $8,000 in FHSA participation room for 2024. Derek transfers $12,000 from his RRSP to his FHSA on April 14, 2024, and contributes $2,000 to his FHSA on July 13, 2024. On August 25, 2024, Derek realizes that he made a mistake and now has an excess FHSA amount of $6,000.
- plus $0 (excess FHSA amount at the end of 2023)
- +plus $14,000 (contributions to the FHSA and transfers to the FHSA up to August 25, 2024)
- -minus $0 (designated amounts up to August 25, 2024)
- -minus $0 (taxable withdrawals up to August 25, 2024)
- -minus $0 (amounts deemed received on cessation of the FHSA up to August 25, 2024)
- -minus $0 (unused FHSA re-participation room at the end of 2023)
- –minus $8,000 ($8,000 + $0 FHSA participation room carryforward for 2024)
- =eqauls $6,000 (Derek's excess FHSA amount as of August 25, 2024)
On August 28, 2024, he goes to his financial institution to tell his financial advisor that he needs to remove his excess FHSA amount of $6,000. Derek lets his advisor know that he wants to minimize any income inclusions if possible.
Derek’s advisor tells him that he can make a designated withdrawal of up to $2,000, as the designated withdrawal is limited to the total amount of contributions to Derek’s FHSA. The remainder of the excess FHSA amount can be eliminated with a designated transfer to his RRSP.
Derek decides to transfer $6,000 as a designated transfer from his FHSA to his RRSP. He fills out the form and his financial institution completes the direct transfer from his FHSA to his RRSP.
Derek is aware that he will have to pay a 1% tax on the highest excess FHSA amount for each of the months of April, May, June, July and August 2024. He must also file Form RC728, First Home Savings Account (FHSA) Return and Form RC728-SCH-A Schedule A, Excess FHSA Amounts, to report and pay the tax on her excess FHSA amount.
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