What happens to your FHSA if you never buy a home

Your FHSA - the First Home Savings Account where contributions are tax-deductible and qualifying withdrawals are tax-free - has a 15-year clock. Use it or lose the tax benefits, but the money doesn't vanish.

Most people treat the FHSA like it's all-or-nothing: buy a home and win, or don't buy and lose. That's not how it works. You've got three options if you never buy, and two of them aren't terrible.

The 15-year deadline

Your FHSA must be closed by December 31st of the year that contains the 15th anniversary of when you opened it. Open an FHSA in March 2025, and you have until December 31, 2040 to use it for a home purchase.

The 15-year limit isn't renewable. You can't close an unused FHSA and open a fresh one. This is your one shot at the account.

Option 1: Transfer to your RRSP

Everything in your FHSA - contributions and growth - can transfer directly to your RRSP without tax consequences. This is usually the best choice if you never buy a home.

The transfer doesn't use up your RRSP contribution room. If you've got $25,000 in your FHSA and $10,000 of unused RRSP room, the full $25,000 moves over anyway. Your RRSP room stays at $10,000 for new contributions.

You'll already claimed the tax deduction when you contributed to the FHSA, so the transfer to RRSP doesn't generate another deduction. But the money keeps growing tax-sheltered until you withdraw from the RRSP in retirement - when it gets taxed as income.

At $80,000 in Ontario, those FHSA contributions already saved you roughly 31.5% in taxes. Moving to an RRSP preserves that benefit, even if you never bought a house.

Option 2: Withdraw everything (and pay tax on growth)

You can withdraw your FHSA balance in cash, but here's the catch: you pay tax on the growth, not the contributions.

Say you contributed $20,000 over three years and it grew to $24,000. You can withdraw the full $24,000, but you'll owe tax on the $4,000 growth at your marginal rate. The $20,000 in contributions comes out tax-free - you already got the deduction going in.

This option makes sense if you need the money for something other than retirement and you're in a low tax bracket when you withdraw. TaxSplit.ca will show you exactly what you'd owe based on your current income and province.

Option 3: Do nothing (and get forced into option 2)

If you don't choose by the deadline, the CRA closes your FHSA and treats it as a full withdrawal. You'll get a tax slip for all the growth, and the money gets deposited to whatever account your FHSA provider has on file.

This is the worst outcome - you lose control over timing and get hit with the tax bill whether you're ready or not.

When to stick with the FHSA vs. switching strategies

The longer you think you might buy a home, the longer you should keep the FHSA. Even at year 12 or 13, if there's a chance you'll buy within the remaining window, the tax-free withdrawal benefit beats the RRSP transfer.

But if you're certain you won't buy - maybe you're planning to rent long-term, or you inherited a property - transferring to RRSP earlier gives you more years of tax-sheltered growth on the retirement side.

The 2025 FHSA limit is $8,000 per year with a $40,000 lifetime maximum. If you've been maxing it out but your homebuying plans changed, you've still got a solid retirement account that happened to have a different name for a few years.

If you're not buying a home, transfer to RRSP. You keep the tax benefits and the growth keeps rolling.