⚠️ What Happens If You Contribute or Transfer Too Much to Your FHSA

📊 How Excess is Calculated

Your excess FHSA amount is determined by comparing:

• Total contributions and transfers to your FHSA that year
• Your FHSA participation room for the year (e.g., $8,000 in the year you opened the account) plus any carryforward and adjustments
• Minus designated amounts (withdrawals/transfers that eliminate excess) and amounts that reduced previous excesses

If the result is positive, that’s your excess FHSA amount for the year. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

💰 Tax on Excess Amounts

📉 You’ll generally pay a tax of 1 % per month on the highest excess FHSA amount for each month that the excess remains in your account. This penalty continues until the excess is fully removed. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

You must report and pay this tax on Form **RC728, FHSA Return**, and Schedule A, **Excess FHSA Amounts**. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

🔧 How to Fix an Excess FHSA Amount

You can eliminate or reduce your excess FHSA amount using the following options:

• 📤 **Designated withdrawal** — remove an amount from your FHSA. This isn’t included in income for that year. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))
• 🔄 **Designated transfer to RRSP or RRIF** — transfer excess to your RRSP/RRIF without tax or losing deduction room. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))
• 📉 **Taxable withdrawal** — if needed, withdraw the excess but include it in income on your tax return. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

For designated actions, you usually complete **Form RC727** and submit it to your FHSA issuer. Your financial institution issues a T4FHSA slip showing designated amounts. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

📘 Examples

• 🏡 **Ridwan** overcontributed $1,500 in 2025 and made a designated withdrawal — which eliminated the excess without taxable income. He still paid a 1% tax for the months excess existed. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))
• 📈 **Bailey** transferred $5,000 too much, then made a designated transfer from FHSA to her RRSP — reducing excess with no taxable income. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))
• ⚠️ **Derek** both contributed and transferred too much; he used designated transfers and withdrawals appropriately to eliminate his excess. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account/what-happens-contribute-transfer-too-much.html))

📌 Key Tips

• 🔎 Always track contributions and transfers against your FHSA participation room each year (see how to calculate FHSA room).
• 📆 Act promptly to eliminate excess — the 1 % tax applies for every month it remains.
• 📑 File the RC728 return and Schedule A when reporting excess FHSA taxes.

🌐 Related Links

• First Home Savings Account – CRA Overview
• Contributing to Your FHSA
• Withdrawals & Transfers Out of Your FHSAs