Taxable Account

A taxable account, sometimes called a general investment account or regular brokerage account, is the standard way to invest outside of tax-advantaged accounts such as pensions and retirement accounts.

In a taxable account, interest, dividends and realized capital gains are usually taxed according to the investor's tax rules each year. For example, if an investor receives 500 of dividends and sells shares for a gain of 2,000 in a year, both may need to be reported and taxed, depending on local allowances and rates.

Taxable accounts offer flexibility. There are usually no limits on how much can be contributed, no restrictions on when money can be withdrawn and no penalties for early access, unlike many retirement accounts.

Investors often use taxable accounts after making full use of tax-advantaged accounts, or for goals that require access to money before retirement.

Careful management can reduce taxes in taxable accounts. Strategies include holding investments for longer periods where long-term gains receive favourable rates, choosing tax-efficient funds, using tax-loss harvesting where permitted and placing income-producing investments in tax-advantaged accounts instead.