A non-registered account (sometimes called a taxable or cash account) is an ordinary investment or brokerage account that doesn't carry any of the tax shelters of a TFSA, RRSP, FHSA, or RESP. You pay tax on income and gains as they're realized.
How it's taxed: - Interest (from GICs, bonds, savings) is taxed at your full marginal rate every year. - Eligible Canadian dividends get a dividend tax credit, making them taxed at a lower effective rate than interest. - Foreign dividends (US stocks, etc.) are taxed at your full marginal rate and usually have withholding tax that you can partly recover via a tax credit. - Capital gains are taxed at 50% inclusion — only half the gain is added to your taxable income.
When non-registered makes sense: 1. After you've maxed out your TFSA, RRSP, FHSA, and (if you have kids) RESP. 2. For a specific goal where you need the money in less than 5 years and a TFSA wouldn't be optimal (e.g., a deposit on a non-first-home property). 3. For income-splitting tactics that require the asset to be in a specific person's name.
Asset location strategy: most couples put interest-paying investments (bonds, GICs) in registered accounts where the interest is tax-sheltered, and put low-dividend Canadian equity ETFs in their non-registered account where the dividend tax credit applies and only realized capital gains are taxed.