It depends. If you make a qualifying tax-free withdrawal, no taxes will be deducted from the amount, and you will not have to include the amount in your taxable income that year.
To make a qualifying withdrawal from your First Home Savings Account (FHSA) you must meet the following conditions:
Be a first-time homebuyer
Have a written agreement to buy or build a qualifying home in Canada by October 1 of the year after you make the withdrawal from your FHSA
Intend to live in the home within a year of buying or building it
Be a resident of Canada throughout the period from the withdrawal to the acquisition of the house
You can also transfer funds from your FHSA to another FHSA, Registered Retirement Savings Plan (RRSP), or Registered Retirement Income Fund (RRIF) on a tax-free basis.
If you make a withdrawal from your FHSA for any other purpose, your withdrawal will be subject to withholding tax and the amount you withdraw will be added to your taxable income. Plus, your FHSA contribution room will not be re-instated.
Once you make a qualifying withdrawal, you will need to close your account and transfer or withdraw all funds left in your FHSA by December 31 of the following year. If you make a non-qualifying withdrawal, you will not have to close your account (unless you have had it for 15 years or are turning 71)—but your contribution room will not be reinstated.