Once your TFSA, RRSP, and FHSA room is used up, a non-registered account is often the next logical step. Here's how it works and what to keep in mind.
A non-registered account (sometimes called a taxable or cash/margin account) is simply an investment account that isn't wrapped in a government-registered plan like the TFSA, RRSP, RRIF, or FHSA. You can open one at almost any bank, brokerage, or robo-advisor, and hold the same kinds of investments you'd hold anywhere else: stocks, ETFs, bonds, mutual funds, and cash.
The key difference is tax treatment. Registered accounts come with rules in exchange for tax advantages — the TFSA shelters growth entirely, the RRSP defers tax until withdrawal, and the FHSA combines both for a first home purchase. A non-registered account has none of that shelter. Every year, you report the income it generates on your tax return, whether or not you actually withdrew any money.
For most Canadians, the non-registered account isn't a first choice — it's what comes next. The TFSA and RRSP both have annual contribution limits, plus a lifetime cumulative limit made up of unused room carried forward. The FHSA has its own annual and lifetime caps and is meant for a specific purpose. Once those are maxed out, or once you've already achieved your goal (like buying a first home), any additional savings need somewhere to go.
That's where the non-registered account fits in. It has no contribution limit at all, so it can absorb any amount of savings, whether that's a few hundred dollars a month or a lump sum from an inheritance, a bonus, or the sale of a property. Investors with high savings rates, business owners with irregular income, or anyone who simply maxes out their registered accounts every year will eventually end up using one.
| Income type | How it's taxed |
|---|---|
| Capital gains | Only a portion of the gain is taxable — the rest is yours tax-free; only applies when you actually sell (an unrealized gain on paper isn't taxed) |
| Eligible Canadian dividends | Grossed up for tax purposes, then a credit is applied to offset some of the tax owed — usually a lower effective tax rate than on regular income like interest |
| Foreign dividends and interest | Don't qualify for the Canadian dividend tax credit and are taxed as regular income at your full marginal rate; foreign jurisdictions often apply a withholding tax at the source; interest is also taxed at your full marginal rate with no special credit |
This is the part that surprises a lot of people, because a non-registered account doesn't tax all income the same way. There are three broad categories.
Because these categories are taxed so differently, where you hold a given investment (registered vs. non-registered, and which registered account) can matter as much as what you hold. This is a nuanced topic and often worth discussing with a tax professional or advisor, especially once a portfolio includes a mix of Canadian equities, foreign equities, and fixed income.
What the non-registered account gives up in tax shelter, it makes up for in flexibility. There's no annual contribution limit to track, no penalty for over-contributing, and — unlike the RRSP or RRIF — no minimum or mandatory withdrawal schedule. You can add money, take money out, or leave it untouched indefinitely, on your own timeline.
This also makes it well suited to specific goals that don't map neatly onto a registered account: saving for a goal beyond home ownership, building a taxable investment pool for a business, or simply parking money you want liquid and accessible without withdrawal restrictions. Some investors also use non-registered accounts once they've filled every available type of registered room, effectively as the "overflow" tier of their long-term savings.
In a non-registered account, you are responsible for tracking your adjusted cost base (ACB) for every holding — essentially, the running average cost of your shares or units, adjusted for purchases, reinvested distributions, returns of capital, and corporate actions like stock splits. Your ACB is what determines the size of your capital gain or loss when you eventually sell, and therefore how much tax you owe.
This sounds simple in theory but gets complicated quickly in practice, especially if you buy the same security multiple times at different prices, reinvest dividends automatically (DRIP), or hold the same stock across more than one account. An inaccurate ACB can mean overpaying or underpaying tax, and if the Canada Revenue Agency ever asks for documentation, you're expected to be able to show your work. This is exactly the kind of detail that's easy to lose track of with spreadsheets or scattered brokerage statements, which is why tools like WealthWise are built to track ACB automatically across all your holdings and accounts as transactions happen, rather than reconstructing it manually at tax time.
A non-registered account tends to make the most sense for people who have already used up their available registered room, or who have a savings rate that consistently exceeds it. It also suits investors who value flexibility over tax minimization — for example, someone who wants access to funds without formal withdrawal rules, or who wants to hold a specific investment outside the constraints of a registered plan.
It's less about whether a non-registered account is "good" or "bad" and more about sequencing: for most people, registered accounts come first because of their tax advantages, and the non-registered account becomes the natural next step once that room is exhausted or already serving another goal.
A non-registered account isn't a consolation prize — it's a flexible, unlimited tool that fills a real gap once registered savings vehicles are maxed out. Understanding how capital gains, Canadian dividends, and foreign income are each taxed differently helps you make more informed decisions about what to hold where, and keeping a clean, accurate ACB record protects you from tax-time surprises down the road.
Not necessarily. A margin account is a type of non-registered account that also lets you borrow to invest, but you can have a non-registered (cash) account without any borrowing at all. The tax treatment described here applies to non-registered accounts generally, whether or not margin is used.
Yes. Unlike registered accounts, income earned in a non-registered account — interest, dividends, and realized capital gains — is generally reportable in the year it's earned or realized, regardless of whether you withdraw the cash or leave it invested.
Generally, most Canadians prioritize registered accounts first because of their tax advantages, and turn to a non-registered account once that room is used up or already committed to another goal. Your personal situation, income level, and goals can change this, so it's worth reviewing with a tax or financial professional.
Moving an investment from a non-registered account into a registered account (or vice versa) is generally treated as a disposition for tax purposes, which can trigger a capital gain or loss based on your ACB at the time. It's worth understanding the implications, and keeping good records, before making this kind of transfer.
Start with WealthWise for free →
Wealth