When to use it, ACB tracking, capital gains vs dividends — the guide for after maxing registered accounts
A non-registered account (also called an open account, taxable account, or investment account) should only be used after you have maximized all available registered accounts: TFSA, RRSP, FHSA (if applicable), and RESP (for children's education). The non-registered account offers no upfront tax deduction and no shelter from annual investment income — but it is the only option once registered room is exhausted.
Scenarios where a non-registered account is necessary:
Three types of investment income are taxed differently in a non-registered account:
| Income Type | Tax Treatment | Example Rate (Ontario, $100K income) |
|---|---|---|
| Interest income | Fully taxable at marginal rate | ~43.4% |
| Canadian eligible dividends | Grossed up 38%, dividend tax credit applied | ~29.5% effective |
| Capital gains | 50% inclusion rate — half is taxable | ~21.7% effective |
| Foreign dividends (US, etc.) | Fully taxable, foreign tax credit for withheld amount | ~43.4% less FTC |
| Return of capital | Not immediately taxable — reduces ACB | Deferred until sale |
This tax hierarchy (capital gains best, interest worst) should drive your asset location decisions: keep high-interest assets (GICs, bonds) in registered accounts where tax is deferred, and hold Canadian dividend stocks and growth equity in non-registered where the preferential rates apply. See our asset location guide.
In 2026, the capital gains inclusion rate for individuals remains at 50% for amounts up to the annual threshold. Half of any capital gain is included in your taxable income and taxed at your marginal rate. A $50,000 capital gain results in $25,000 of taxable income — taxed at your marginal rate on that increment.
Your ACB is the average cost of your investment, including all commissions and fees. It is used to calculate capital gains when you sell. Accurate ACB tracking is mandatory for accurate tax reporting — the CRA does not track ACB for you, and errors can result in over- or under-reporting of capital gains.
Assume you buy 100 shares of XYZ at $20 ($2,000 total ACB). You later buy 50 more shares at $25 ($1,250). Total ACB = $3,250 / 150 shares = $21.67/share ACB. If you later sell 80 shares at $30: proceeds = $2,400, ACB allocated = 80 × $21.67 = $1,733, capital gain = $2,400 – $1,733 = $667, taxable portion (50%) = $333.50.
Canadian eligible dividends from public corporations receive preferential tax treatment through the gross-up and dividend tax credit mechanism. The actual effective tax rate on eligible dividends in most provinces is significantly lower than on interest income:
| Province | Effective Rate on Eligible Dividends (~$100K income) | Effective Rate on Interest Income |
|---|---|---|
| Ontario | ~29.5% | ~43.4% |
| BC | ~31.6% | ~40.7% |
| Alberta | ~24.8% | ~36.0% |
| Quebec | ~36.4% | ~47.5% |
For this reason, Canadian dividend-paying stocks (banks, utilities, telecoms, REITs paying eligible dividends) can be tax-efficient holdings in a non-registered account — more so than in an RRSP where the preferential dividend rate is lost on withdrawal.
Tax-loss harvesting is the deliberate realization of capital losses to offset capital gains in the same year (or carried back 3 years / forward indefinitely). In a non-registered account, this is one of the few active tax-planning tools available. Steps:
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