Investment Fees Tax-Deductible

Are Your Investment Fees Tax-Deductible? A Guide to Non-Registered Accounts and Tax Efficiency in Canada

By Bill Craven

Introduction: Why This Matters to Canadian Investors

If you’re investing through a non-registered account, chances are you’ve already asked yourself: “Can I deduct my advisor’s fees?” It’s a smart question — and the answer can directly impact your bottom line at tax time.

Unlike registered plans like RRSPs or TFSAs, non-registered accounts are fully taxable — which means every interest payment, dividend, and capital gain could create a tax liability. But with the right knowledge and planning, there are legitimate ways to offset some of that tax, starting with the potential deductibility of certain advisor fees.

In this article, we’ll walk you through:

• What non-registered accounts are
• Why tax efficiency matters more than ever
• Which advisor fees are deductible (and which aren’t)
• Real examples of how tax optimization can save you money
• How working with a qualified financial planner can make all the difference

Let’s start with the basics.

What Is a Non-Registered Investment Account?

A non-registered investment account is exactly what it sounds like — an investment account that isn’t registered with the Canadian government for special tax treatment. This means it doesn’t have contribution limits, withdrawal restrictions, or tax shelters like RRSPs or TFSAs.

You can hold a wide variety of investments inside a non-registered account, including:

• ✔️ Stocks
• ✔️ Bonds
• ✔️ Mutual funds
• ✔️ ETFs
• ✔️ GICs and other fixed-income products

Key Characteristics:

• Taxable: You’ll be taxed annually on any income the account generates — including interest, dividends, and capital gains.
• No limits: There are no caps on how much you can contribute or withdraw.
• Flexible: Ideal for long-term growth, surplus income, or inheritance funds not needed immediately.

This type of account is often used by:

• High-income earners who’ve maxed out their RRSPs and TFSAs
• Business owners holding surplus funds
• Retirees drawing income from taxable investments
• Anyone saving or investing outside of registered plans

But here’s the catch: because of their taxable nature, non-registered accounts require careful tax planning to avoid unnecessary tax burdens — and that’s where understanding tax efficiency and advisor fee deductibility comes into play.

Understanding Tax Efficiency in Non-Registered Accounts

When it comes to non-registered investments, the type of income you earn — and how it’s taxed — makes a big difference. This is the heart of what financial planners call tax efficiency: the art of minimizing the taxes you pay on your investment returns.

Here’s how different types of investment income are taxed in Canada:

Let’s break this down:

Interest Income:

• Taxed 100% at your full marginal rate
• If you’re in a higher tax bracket, this can eat up a significant chunk of your return
• Least tax-efficient

Dividend Income:

• Comes with a federal and provincial dividend tax credit
• More tax-efficient than interest
• But only applies to eligible Canadian dividends

Capital Gains:

• You’re only taxed on 50% of the gain
• If you hold an investment for several years and then sell it for a profit, it’s often the most tax-efficient way to grow wealth

Why Tax Efficiency Matters in a Non-Registered Account

In a TFSA, everything is tax-free. In an RRSP, you defer taxes until retirement. But in a non-registered account, you’re taxed every year — which means tax drag can quietly erode your returns over time.

Imagine this:

• Two investors earn the same 5% return
• One earns it through interest, the other through capital gains
• The capital gains investor may keep more after-tax — potentially thousands more over time

This is where tax-efficient investing becomes critical, especially if you’re:

• In a high-income bracket
• Building a retirement income stream
• Managing family wealth or a corporate surplus

But there’s another layer to this: your advisor’s fee structure. And whether those fees are tax-deductible depends on how your investments are managed — something most Canadians aren’t aware of.

Deductibility of Advisor Fees – What the CRA Allows (and What It Doesn’t)

Here’s the truth: not all advisor fees are created equal — at least not in the eyes of the Canada Revenue Agency (CRA).

If you have a non-registered investment account and you’re paying ongoing fees for professional investment advice, some of those fees may be tax-deductible — but only under specific conditions.

What You Can Deduct

According to the CRA, the following fees are generally deductible:

• Investment counsel fees paid specifically for advice on buying and selling securities
• Fees paid directly from a non-registered account, not embedded in a product
• Fees paid to a fee-only or fee-based advisor for managing investments

Example:
You pay a 1% annual fee directly to your financial planner for managing your mutual fund and ETF portfolio in a non-registered account. That 1% may be deductible on your tax return — potentially saving you hundreds or even thousands annually, depending on your income bracket.

What You Cannot Deduct

Here’s where many investors get tripped up. The following are not deductible:

• Commission-based fees (like when you buy stocks or mutual funds with a built-in trailer fee)
• Embedded fees inside mutual funds (MERs)
• Fees related to financial planning, tax preparation, or retirement planning
• Fees for managing RRSPs, TFSAs, RESPs, or other registered accounts
• One-time setup or consultation fees not tied to security trades

CRA Reference:

For those who like to verify, see CRA’s official guidance under IT-238R2 – Fees Deductible for Investment Advice

Why This Matters to You

If you’re working with an advisor or planner, and they’re managing your non-registered investments — it’s worth asking:

• Are my fees being charged directly or embedded in products?
• Am I claiming those eligible fees on Line 22100 of my return?
• Can I restructure my account to make fees more transparent and tax-friendly?

In the next section, we’ll explore real-world examples of how this works — and just how much tax you could be saving with a simple adjustment.

Real-Life Examples – How Advisor Fee Deductibility Impacts Your Bottom Line

To truly understand the power of tax-efficient planning in non-registered accounts, let’s look at two simplified case studies that illustrate just how much difference advisor fee deductibility can make.

Case Study 1: Retired Investor with a Managed Portfolio

Client Profile:

• Age 68, retired
• Lives in Chatham, Ontario
• $400,000 in a non-registered managed portfolio
• Pays 1% annual advisor fee billed directly from the account
• In the 43% marginal tax bracket

Scenario:

• Annual advisor fee = $4,000 (1% of $400,000)
• Because the fee is for investment counsel and is billed directly, it’s tax-deductible under Line 22100

Tax Savings:

• $4,000 × 43% = $1,720 tax reduction annually

Over 10 years, that’s $17,200 in tax savings — just for structuring the account correctly.

Case Study 2: High-Income Professional with Mutual Funds

Client Profile:

• Age 45, incorporated professional
• Lives in London, Ontario
• Invests $250,000 in mutual funds through a bank
• Fees are embedded in the funds’ MERs (approx. 2.25%)
• Pays no direct advisory fee
• In the 48% marginal tax bracket

Scenario:

• Despite paying ~$5,625/year in embedded fees, none are tax-deductible
• The fees reduce investment returns, but provide no tax benefit

Missed Opportunity:

• If restructured into a fee-based portfolio with transparent billing:
  • Fee = 1% = $2,500/year
  • Deductible amount = $2,500 × 48% = $1,200/year in potential tax savings

Takeaway: This professional is paying more in fees and getting less tax benefit, simply due to how the account is structured.

What These Examples Show

• Deductibility isn’t automatic — it depends entirely on how fees are charged
• Investors working with fee-based advisors in non-registered accounts may unlock legitimate tax savings
• Even small tweaks can create meaningful long-term benefits

In the final section, we’ll explain how working with a Certified Financial Planner — like Bill Craven — can help you restructure your investments for greater tax efficiency and peace of mind.

How a Financial Planner Can Help You Save (and Stay Compliant)

The truth is, many Canadians are unknowingly leaving money on the table — paying investment fees without realizing they could be deductible, or missing out on smarter ways to reduce taxes in their non-registered accounts.

That’s where an experienced financial planner makes a meaningful difference.

Personalized Planning That Goes Beyond Products

A Certified Financial Planner (CFP) doesn’t just recommend investments — they look at your entire financial picture:

• Your income and tax bracket
• Your investment structure
• Your retirement timeline
• How your accounts are taxed — and how they could be taxed more efficiently

They ask questions like:

• Are your fees eligible for deduction under CRA rules?
• Should your investment strategy prioritize capital gains over interest income?
• Are there ways to consolidate or restructure your accounts to unlock tax savings?

Avoid Costly Mistakes (and Common Misunderstandings)

Without professional advice, it’s easy to:

• Hold high-interest products in taxable accounts (creating unnecessary taxes)
• Use commission-based accounts and lose deductibility
• Miss out on claiming eligible fees on your tax return
• Assume your bank’s investment plan is “good enough” — when it’s really just expensive

A trusted advisor helps you avoid these traps legally and ethically, while keeping you fully aligned with CRA expectations.