What are Non-Registered Investment Accounts?
Non-registered accounts are taxable investment accounts available to Canadians. As the name suggests, it is not registered with the Canadian federal government. Non-registered accounts are flexible, offer tax advantages, and have no contribution limits. There are two primary types of non-registered brokerage accounts: cash accounts and margin accounts.
How do they work?
Non-registered accounts are investment accounts offered by banks and financial service providers in Canada, as well as mutual fund and Life Insurance companies.
Many financial advisors recommend using non-registered accounts for short and long-term investing. These accounts offer a lot of flexibility with consistent liquidity and no contribution limits, as well as a tax benefit. Dividends are taxed on a gross amount but benefit from a dividend tax credit. Capital gains from investments in non-registered accounts are taxable at only 50% of the
account holder’s marginal tax rate. However, interest income is fully taxable at the account holder’s marginal tax rate.
What are the benefits of Non-registered account?
There are several benefits of these, like:
- Unlike Registered Retired Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs), non-registered accounts have no contribution limits, so you can save as much as you want without any penalty. There are also no withdrawal limits.
- Anyone over the age of 18 (or 19 in certain provinces) can open a non-registered account. There is no age limit on a nonregistered account.
- A non-registered account can be useful if you’ve reached your contribution limit on an RRSP or a TFSA.
