A non-retirement account is any investment or bank account that does not receive the special tax treatment given to 401(k)s, IRAs, and similar retirement plans. In exchange for paying tax on the earnings each year, you get unlimited contributions, penalty-free access at any age, and no rules forcing you to withdraw money at a certain point. These accounts are the standard tool for goals that sit outside retirement: a house down payment, a child’s college fund, or simply building wealth on your own timeline.
Common Types
An individual brokerage account is the simplest version. One person owns it, and that person can buy and sell stocks, bonds, mutual funds, and ETFs through a broker-dealer.
A joint brokerage account is shared by two or more owners. The most common form, joint tenants with right of survivorship, means that when one owner dies, the survivor automatically receives the deceased owner’s share without probate.1Cornell Law School. Right of Survivorship Married couples often use this structure for shared investing.
Custodial accounts under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act let an adult manage investments for a child. The child legally owns the assets, and the custodian directs the account until the child reaches the age set by state law, typically 18 or 21. At that point the child gets full control and can use the money however they choose.
Trust accounts hold assets managed by a trustee for named beneficiaries, with distributions governed by the trust document. Businesses, LLCs, and other legal entities can open non-retirement brokerage accounts as well, though brokerages generally require formation documents such as articles of organization or a partnership agreement.
On the banking side, checking accounts, savings accounts, and certificates of deposit are also non-retirement accounts. They focus on cash management rather than securities investing, and they carry FDIC insurance up to applicable limits. What ties all of these together is what they lack: none receive the tax-deferred or tax-free treatment of a retirement plan.
How the Account Is Taxed Each Year
Retirement accounts let earnings grow tax-deferred, or tax-free in a Roth. A non-retirement account does neither. Interest, dividends, rental income, and gains on sales all count as gross income in the year they are earned.2Office of the Law Revision Counsel. 26 USC 61 – Gross Income Defined
Interest and Dividends
Interest from a savings account, CD, or bond fund is taxed as ordinary income at your regular federal rate, which runs from 10% to 37% for 2026 depending on total taxable income.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Ordinary dividends are taxed at the same rates.
Qualified dividends, which come from shares held for a minimum period (generally more than 60 days), are taxed at the lower long-term capital gains rates of 0%, 15%, or 20%.4Internal Revenue Service. Topic No. 404, Dividends and Other Corporate Distributions Your brokerage reports which dividends are qualified on your year-end tax forms.
Net Investment Income Tax
Higher earners pay an additional 3.8% net investment income tax (NIIT) on top of the regular rates. NIIT applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds these thresholds:5Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
- $250,000 if married filing jointly or a qualifying surviving spouse
- $200,000 if single or head of household
- $125,000 if married filing separately
Investment income for this purpose includes interest, dividends, capital gains, rental income, and royalties. The thresholds are fixed by statute and do not adjust for inflation, so more filers cross them over time.6Internal Revenue Service. Topic No. 559, Net Investment Income Tax
Capital Gains, Losses, and Wash Sales
Sell an investment for more than you paid and the profit is a capital gain. Sell for less and it is a capital loss. How the gain is taxed depends on how long you held the asset.
Assets held for one year or less produce short-term gains, taxed at ordinary income rates. Assets held more than one year produce long-term gains, which qualify for 0%, 15%, or 20% rates depending on income.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Losses first offset gains of the same type: short-term against short-term, long-term against long-term. If total losses exceed total gains, you can deduct up to $3,000 of the excess against ordinary income ($1,500 if married filing separately). Anything left carries forward to future years indefinitely.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Watch the wash sale rule. If you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the IRS disallows the loss for that year.8Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities The disallowed loss is not lost forever. It gets added to the cost basis of the replacement shares, reducing your taxable gain when you eventually sell them. Lose $500 on a sale, trigger a wash sale, and buy replacement shares for $2,000, and your new basis becomes $2,500.
No Contribution Limits, No Early Withdrawal Penalty, No RMDs
There is no cap on how much you can put in. A 401(k) limits employee contributions to $24,500 for 2026, and IRAs cap annual contributions at $7,500.9Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 A non-retirement brokerage account has no ceiling at all. Invest $500 or $5 million in the same year.
You can also pull money out at any age for any reason. Retirement accounts generally impose a 10% penalty on withdrawals before age 59½.10Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts Non-retirement accounts do not.
And there are no required minimum distributions. Retirement accounts force withdrawals starting at age 73, with a 25% excise tax on amounts you should have taken but didn’t.11Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Your non-retirement account can stay invested as long as you want.
Estate Planning Features
Transfer on Death
Most brokerages let you add a Transfer on Death (TOD) designation to an individual account. A TOD names one or more beneficiaries who receive the assets when you die, skipping probate entirely. You keep full control during your lifetime and can trade, withdraw, or change beneficiaries whenever you want. A TOD designation generally overrides instructions in a will for the same account, so keep your beneficiary choices in step with the rest of your estate plan.
Step-Up in Basis
When heirs inherit investments held in a non-retirement account, the cost basis of those assets resets to the fair market value on the date of the owner’s death.12Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent Decades of unrealized gain can disappear. Buy shares for $10,000, die when they’re worth $100,000, and your heirs’ new basis is $100,000. Sold immediately, they owe no capital gains tax on the $90,000 of appreciation that built up during your lifetime. Retirement accounts do not get this treatment, which is why many families use taxable accounts as a companion to their 401(k)s and IRAs for long-term wealth transfer.
Margin Is Only Available Here
Many brokerages offer margin accounts, which let you borrow against securities you already own to buy more. Under Federal Reserve Regulation T, you can borrow up to 50% of the purchase price of eligible securities, and most firms require at least $2,000 in the account before you can trade on margin.13U.S. Securities and Exchange Commission. Understanding Margin Accounts
Margin magnifies gains and losses. If your investments drop enough, the brokerage can issue a margin call requiring you to deposit cash or sell holdings to bring the account back to the required level. Interest on the borrowed amount may be deductible as an investment interest expense, but only up to your net investment income for the year.14Internal Revenue Service. Form 4952, Investment Interest Expense Deduction Margin trading is not permitted in retirement accounts, so this feature is unique to non-retirement brokerage accounts.
Tax Forms You’ll Get
Each year the brokerage sends documents summarizing account activity. The three most common:
- Form 1099-DIV reports dividends and capital gain distributions. Due to you by January 31.
- Form 1099-INT reports interest income from bonds, CDs, or cash balances.
- Form 1099-B reports proceeds from every sale, along with your cost basis. Due by mid-February.15Internal Revenue Service. General Instructions for Certain Information Returns
You use these figures to complete Schedule D and Form 8949 with your federal return. Most tax software imports the data automatically. Double-check the cost basis on your 1099-B if you moved shares from another brokerage, because the receiving firm may not have your original purchase price on file.
Opening or Moving an Account
Federal rules require broker-dealers to verify your identity before opening an account. You’ll provide a taxpayer identification number (usually your SSN, or an EIN for an entity), a government-issued photo ID such as a driver’s license or passport, your legal name, date of birth, and residential address, and bank account information for funding.16eCFR. 31 CFR 1023.220 – Customer Identification Programs for Broker-Dealers The brokerage may also ask you to complete IRS Form W-9 certifying your TIN.17Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification Most applications finish online, with identity checks clearing in one to three business days and electronic bank transfers funding the account in another two to five.
If you already have a brokerage account and want to move it, you don’t need to liquidate. The industry uses the Automated Customer Account Transfer Service (ACATS) to move assets in kind, generally within about six business days.18U.S. Securities and Exchange Commission. Transferring Your Brokerage Account: Tips on Avoiding Delays Some firms charge an outgoing transfer fee of roughly $50 to $100, though many charge nothing, and the receiving brokerage will often reimburse the fee if you ask.