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The gross amount of the withdrawal will be reported as income in the tax year in which it is withdrawn, and a withholding tax will be withheld on the amount (similar to an RRSP).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.
For example: You have an annual income of $65,000 and live in Ontario paying a marginal tax rate of approximately ~30% (combined federal & provincial).
If you withdraw $5,000 out of your FHSA, the withholding taxes may not completely cover potential future income taxes, because the withholding tax rate is only 10% (see below).
This is for example and educational purposes only, Questrade is unable to provide specific tax advice pertaining to your financial situation.
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
Amount withdrawn |
Tax withheld |
Tax withheld (Quebec) |
$0 - $5,000 |
10% |
19% (5%¹ + 14%²) |
$5,000.01 - $15,000 |
20% |
29% (10%¹ + 19%²) |
$15,000.01 + |
30% |
34% (15%¹ + 19%²) |
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.
For example: A 20% withholding tax is withheld on a $4,500 USD withdrawal. This is because a $4,500 USD x FX rate of 1.3 USD/CAD equates to $5,850 CAD, which falls into the 20% withholding tier.