Investments, Open Account

No Limits. No Restrictions. The Account That Never Runs Out of Room.

Once you’ve maxed your RRSP and TFSA, the open account is where serious wealth gets built. No contribution limits, and more tax strategy than most people realize.

An open (non-registered) investment account has no government rules around how much you can contribute or what you can hold. The tradeoff is that investment income is taxed annually. But not all income is taxed equally, and that distinction is where a thoughtful strategy makes a real difference. Capital gains, Canadian dividends, and interest income all receive different tax treatment. Knowing which investments belong in which account is one of the most impactful decisions in a complete financial plan.

Tax Treatment

Not All Investment Income Is Taxed the Same

The open account is taxed, but the tax rate depends heavily on the type of income generated. Structure matters.

Capital Gains ✦ Most Efficient

50%

Only 50% of a capital gain is included in taxable income (or 2/3 above $250,000 as of 2024). This makes long-term growth investments the most tax-efficient asset to hold in an open account.

Canadian Dividends

~25–39%

Eligible dividends from Canadian companies receive the dividend tax credit, reducing the effective tax rate significantly, often lower than employment income at the same bracket.

Interest Income

Full rate

Interest income is taxed at your full marginal rate, the least tax-efficient type. This is why bonds, GICs, and savings instruments belong inside registered accounts (RRSP/RRIF) first.

Strategy

How to Use an Open Account Smartly

Asset Location Strategy

The most tax-efficient investments, Canadian dividend payers, growth equities, belong in your open account. Interest-bearing assets (bonds, GICs) belong in your RRSP or RRIF where they’re sheltered. This “asset location” strategy can meaningfully reduce your annual tax bill without changing what you own, just where you own it.

Tax-Loss Harvesting

When investments in your open account have declined in value, you can sell them to realize a capital loss, which offsets capital gains in the current year, or can be carried back 3 years or forward indefinitely. This is only possible in a non-registered account; losses inside an RRSP or TFSA are not deductible.

Timing Capital Gains

Unlike registered accounts, you control when gains are realized in an open account. Spreading gains across years, or delaying them to lower-income years, can reduce the marginal rate at which they’re taxed. This flexibility is one of the open account’s greatest underappreciated advantages.

Corporate Open Accounts

Business owners can also hold investments inside their corporation, effectively a corporate open account. Retained earnings invested corporately can grow at the low corporate tax rate before personal tax is triggered. This is one of the core strategies for incorporated business owners with surplus capital.

Foreign Investments

The open account has no restrictions on foreign holdings. Foreign dividends don’t benefit from the Canadian dividend tax credit and may be subject to foreign withholding tax. However, the open account can hold foreign ETFs or equities without the TFSA limitation around foreign dividend withholding, another nuance in asset location decisions.

Gifting Appreciated Securities

Donating appreciated securities held in an open account directly to a registered charity eliminates the capital gain entirely while generating the full charitable donation receipt. This is significantly more tax-efficient than selling the security and donating cash, a strategy frequently overlooked by both donors and advisors.

Common Questions

Open Account. What People Ask Us

Should I use an open account before I've maxed my RRSP and TFSA?

Generally no. Registered accounts offer tax sheltering that an open account doesn’t. The order of priority for most people is: TFSA (tax-free growth) → RRSP (tax deduction + deferral) → FHSA if applicable → Open account. That said, there are situations, such as very high income with specific near-term goals, where an open account makes sense alongside registered accounts. We assess this as part of a complete plan.

How do I report capital gains on my taxes?

Your financial institution provides a T5008 slip showing proceeds from securities sold. You calculate the gain or loss by subtracting your adjusted cost base (ACB), what you paid, adjusted for reinvested distributions and other factors, from the proceeds. This is an area where tracking records carefully over time is important, and where many self-directed investors run into difficulty.

What is the superficial loss rule?

If you sell a security for a loss in your open account and repurchase the same (or identical) security within 30 days before or after the sale, either in the same account or an affiliated account, CRA disallows the loss. This is the “superficial loss” rule. It’s one of the key considerations when executing a tax-loss harvesting strategy.

Can a couple share an open investment account?

Yes, a joint open account is common for couples. Investment income from the account is typically reported proportionally based on each person’s contribution. Attribution rules apply if one spouse contributes significantly more than the other, income may be attributed back to the contributing spouse. The rules are nuanced and worth understanding before setting up a joint account.

Ready to Build Wealth Beyond Your Registered Accounts?

An open account without a strategy is just taxable savings. With the right approach, it’s a powerful part of a complete wealth plan.

Manjit Singh Sandhu · Financial Advisor