Comparing Canada’s Home Buyers’ Plan (HBP) and First Home Savings Account (FHSA)—What Happens When You Leave (or Return to) Canada?
- Quick Primer on Each Program
| HBP | FHSA | |
| How it works | Withdraw up to $60,000 from your RRSP tax-free, if you later repay it | Contribute up to $8,000/yr, $40,000 lifetime; withdrawals for a qualifying home are tax-free |
| Tax treatment going in | RRSP contribution already deducted | Contributions are tax-deductible (like an RRSP) |
| Tax treatment coming out | Tax-free only if you respect every HBP rule and repay on schedule | Tax-free if you meet the “qualifying withdrawal” tests; otherwise fully taxable |
| Repayment | Required: 1/15 per year over 15 years | None, unless the withdrawal is non-qualifying |
| Can you also use the other plan? | Yes—the two programs can be combined | Yes |
| Must be resident of Canada at withdrawal? | Yes | Yes |
- Standard Rules Before Any Cross-Border Twist
Home Buyers’ Plan (HBP)
- Eligibility: Canadian resident, first-time home buyer (no owner-occupied home during the four preceding calendar years).
- Withdrawal limit: $60,000 (since 2024).
- Deadline to acquire the home: By Oct 1 of the year after withdrawal (one-year extension possible).
- Repayments: Equal to 1/15 of the withdrawal each year; missed amounts are added to income (line 12900).
First Home Savings Account (FHSA)
- Eligibility: Canadian resident, 18-71, first-time buyer.
- Contribution room: $8k per year, $40k lifetime; unused room (to a max of $8k) carries forward. The account can be open for up to 15 years. It must be closed by the end of the 15th year.
- Withdrawal conditions: Must be resident when funds are withdrawn and intend to occupy a qualifying Canadian home as principal residence within one year.
- Maturity: The FHSA must be closed by Dec 31 of the 15th anniversary of opening—or the year you turn 71, by either buying a home, transferring to an RRSP/RRIF tax-free, or taking a taxable cash withdrawal. FHSA funds can be transferred directly to your RRSP or RRIF but only if you have available RRSP room.
- When HBP Participants Become Non-Residents
| Timing of your move | What CRA says you must do |
|
You withdraw under the HBP, then move abroad before buying/building |
You must either: • Cancel your HBP and repay the full amount to your RRSP/PRPP/SPP, or • Include the entire unpaid amount on line 12900 of your T1 tax return for the withdrawal year.Deadline (earliest of): 1. Dec 31 of the year after the year of first withdrawal (extension available), or 2. The day you filed the return for the withdrawal year. |
| You buy/build the qualifying home, then later become a non-resident | Choose one: 1. Repay the remaining HBP balance to your RRSP/PRPP/SPP before filing your tax return for the year you become non-resident or within 60 days of becoming non-resident, or 2. Include the remaining balance in income on line 12900 of your T1 for that year. |
Key implication: if you leave Canada before buying the home, the HBP instantly turns from a tax-free loan into either (a) a rapid full repayment obligation or (b) fully taxable RRSP income. Planning your departure date, and whether you still intend to buy, is important.
- FHSA Rules for Non-Residents
- Becoming non-resident before a qualifying withdrawal means all future withdrawals are taxable Part XIII income, subject to a flat 25 % withholding (treaty-reduced rates may apply, 15% for U.S. residents). canada.ca
- You cannot make a qualifying withdrawal unless you are a resident at withdrawal.
- You may leave the FHSA open but cannot contribute while non-resident.
- Before the 15-year/age-71 deadline, you can transfer the account tax-free to an RRSP/RRIF, even as a non-resident, assuming you have available RRSP room.
- Two Common Cross-Border Scenarios
- Temporary U.S. Assignment, Then Return to Canada to Buy
| Plan | What still works |
| FHSA | Keep contributing while resident. While abroad, contributions stop, but growth continues. Once you re-establish Canadian residency, you can make a qualifying withdrawal and buy your home tax-free. |
| HBP | You can participate only after you return (must be resident at withdrawal). If you already withdrew before leaving and cancelled, you can start a fresh HBP once you’re resident again and meet first-time-buyer rules. |
- Permanent Move to the U.S.—No Intention to Return
| Plan | Outcome |
| FHSA | A qualifying withdrawal is not possible. Options: (1) transfer to RRSP/RRIF before the deadline (then manage RRSP as a U.S. resident, mindful of IRS/FINCEN rules), or (2) withdraw cash and pay 15% Canadian withholding (U.S. residents) plus U.S. tax. |
| HBP | If you withdrew but never bought, you must cancel or include the whole amount in income. If you had already bought the home, either repay the balance within 60 days or include it in income. Future withdrawals under HBP can only be made once the initial HBP has been repaid. |
- Which Tool Is More Forgiving for Globe-Trotters?
| Consideration | Preferred Plan |
| Flexibility if leaving Canada indefinitely | FHSA (transfer to RRSP; no repayment schedule) |
| Maximum down-payment boost if you stay resident | HBP (larger immediate limit) but can use both |
| Administrative simplicity | FHSA (no 15-year repayment) |
| Need to cancel/repay if plans change | FHSA wins—HBP penalties can hit quickly |
- Practical Planning Tips
- Map your career horizon first. If there’s a realistic chance you’ll depart Canada before buying, make sure your RRSP has at a balance of at least $60k (HBP limit) before funding a FHSA. This will simplify your life by having one foreign account rather than two if you do decide to remain in the U.S., and with no obligation to close anything after 15 years. Once you have the HBP limit in your RRSP, if you have the ability to save more, open a FHSA and take advantage of the additional deduction opportunity along with your RRSP.
- Track HBP deadlines rigorously. A sudden U.S. job offer can change housing plans. Make sure to track the acquisition deadline and repay the funds if you decide not to buy.
- Mind the line 12900 surprise. Including an entire $60k HBP withdrawal in one tax year can produce a very large Canadian bill—often at the top marginal rate.
- Coordinate with U.S. tax advice. RRSPs and FHSAs are reportable to the IRS and potentially taxable; Form 8891 is gone, so Form 8938 and FBAR rules apply.
- Consider merging strategies. Some clients fully fund an FHSA first, then use their RRSP for an HBP if they need to once they are confident they’ll remain Canadian residents until most of the HBP is repaid.
If you are not sure if you are leaving Canada for the U.S. permanently, leave your FHSA open until you are sure you are staying in the U.S. You can close it at that time and take the distribution with the worst case being a 15% withholding tax. This may be considerably lower than the income tax you would pay on a non-qualified distribution as a Canadian resident if you close it before your move.
Most provinces and territories have combined federal and provincial tax rates of 50% or more. You don’t have to close the account until the end of the 15th year after it was opened. Leaving the account open until just before the deadline may afford you several extra years of tax-deferred growth.
Both the HBP and FHSA can reduce the tax burden of buying your first Canadian home, but the HBP’s residency-related cancellation rules are unforgiving. If there’s any uncertainty about where your career (or love life) will take you, the FHSA often delivers more flexibility with fewer “gotchas.”
Need help aligning your home-purchase strategy with a possible cross-border move? 49th Parallel Wealth Management specializes in Canada-U.S. planning, so your dream home doesn’t turn into a tax nightmare.
