Registered vs. Non-Registered Accounts: What’s the Difference?

WOWA® Simply Know Your Options

When deciding where to save or invest in Canada, one important choice is how the account is taxed. A registered account receives special tax treatment under federal rules, while a non-registered account is generally taxable. The exact tax treatment of a registered account depends on the type of plan.

A registered account is a savings or investment plan registered under federal tax rules that receives special tax treatment. Depending on the account, investment growth may be tax-free or tax-deferred, and contributions or withdrawals may receive additional tax advantages. The exact rules depend on the type of registered account.

Registered and non-registered describe the account's tax treatment, not the investment itself. The same investment, such as a GIC or ETF, can often be held in either type of account, subject to the plan's rules and the options offered by the financial institution or brokerage.

Common Canadian registered accounts include:

• Tax-Free Savings Account (TFSA): Pay no tax on investment growth or withdrawals.
• Registered Retirement Savings Plan (RRSP): Deduct contributions from your annual income and defer taxes until withdrawal.
• First Home Savings Account (FHSA): Combine tax-deductible contributions with tax-free withdrawals for a first home.
• Registered Education Savings Plan (RESP): Save for a child's post-secondary education with supplemental government grants.

A non-registered account is a standard savings or investment account with no special registered-plan tax treatment. Investment income is generally taxable: interest and dividends are generally reported as earned, while capital gains or losses generally arise when you sell or otherwise dispose of an investment.

The tradeoff for taxable investment income is greater flexibility. There is no government contribution limit, and withdrawals are not restricted by registered-plan rules. However, selling investments to raise cash can have tax consequences.

In a non-registered account, interest and dividends are generally taxable as earned, while capital gains or losses generally arise when investments are sold or otherwise disposed of. In registered accounts, investment income may grow tax-free or tax-deferred, depending on the plan.

Note that non-registered accounts favour capital gains (50% inclusion rate) and eligible Canadian dividends (dividend tax credit) over interest/GICs.

In a non-registered account, a capital loss can generally be used to offset taxable capital gains. A net capital loss can generally be carried back three years or carried forward indefinitely. Losses inside registered accounts generally do not create a deductible capital loss on your personal tax return. See WOWA's Capital Gains Tax Calculator for more on how capital gains and losses affect taxes.

Registered plans have plan-specific contribution limits or rules. For example, some plans have annual contribution limits, while an RESP has a lifetime contribution limit per beneficiary rather than an annual limit. Non-registered accounts do not have a government-imposed contribution limit.

Registered accounts are generally limited by tax rules to qualified investments, such as cash, Guaranteed Investment Certificates (GICs), mutual funds, ETFs, and many publicly traded securities. Certain other investments, including some small-business shares, can also qualify if the applicable conditions are met. Non-qualified or prohibited investments can result in tax consequences. Non-registered accounts can generally hold a broader range of assets, subject to the provider's (trustee) rules. These accounts also permit the investor to borrow against the account's assets and use margin to magnify returns. Note that using margin magnifies losses as well.

Regular RRSP withdrawals are generally taxable, are subject to withholding tax at source, and do not restore RRSP contribution room. Special programs such as the Home Buyers' Plan and Lifelong Learning Plan have different rules. Withdrawing cash from a non-registered account is not itself taxable, but selling investments to fund the withdrawal can trigger a capital gain or loss.

With a non-registered account, you may receive T3 or T5 tax slips for investment income, but you are still responsible for reporting taxable income even when a slip is not issued. If you hold investments that can generate capital gains or losses, keep records of purchases, sales, commissions, and distributions that affect the adjusted cost base (ACB). The ACB is generally the cost of an investment plus expenses to acquire it, adjusted when required.

• Want to benefit from tax-free or tax-deferred growth, or use deductible contributions where available.
• Are saving for targeted milestones like retirement, a home down payment, or education.
• Have available contribution room under the registered plan you intend to use.

• Have used the registered contribution room that makes sense for your goals and still have more to save or invest.
• Need to invest without registered-plan contribution limits or withdrawal conditions.
• Want to hold investments that may not qualify for the registered plan you are considering.

Once you have chosen the right account type for your goals, ensure your cash works as hard as possible by locking in high yields:

• Looking for fixed, guaranteed returns? Explore leading rates for registered and non-registered terms on WOWA’s GIC Rates Comparison.
• Need flexible access to cash or emergency funds? Compare top high-yield accounts on WOWA’s Best Savings Account Interest Rates.

Can I hold both registered and non-registered accounts?

Yes. Registered accounts can provide tax advantages, while non-registered accounts can be used beyond available registered room or when registered-plan rules do not fit your needs.

Is a TFSA a registered account?

Yes. A TFSA is a registered account that can hold cash as well as qualified investments such as GICs, ETFs, stocks, and bonds.

Do non-registered accounts have contribution limits?

No government contribution limit applies, although providers may set product-specific minimums or other account conditions.

Can I claim investment losses in a TFSA or RRSP?

Generally, no. Registered-account losses do not create a personal capital-loss deduction. In a non-registered account, qualifying capital losses can offset taxable capital gains and may be carried to other years.

Do I need to report a non-registered account on my tax return?

You generally report taxable income and realized capital gains or losses from a Canadian non-registered account, not the account itself. Separate reporting rules can apply to certain foreign property.

Do I pay tax if I move money from a non-registered to a registered account?

Moving cash from a non-registered account does not itself trigger tax, but the contribution still uses available contribution room. An in-kind transfer is generally treated as a disposition at fair market value, which can trigger a taxable capital gain. A resulting capital loss may not be deductible according to the superficial loss rule.