2019 Prince Edward Island Marginal Tax Rates

How much you pay in income taxes in PEI will depend on how much you make and how you make your money.  The most taxed earnings will be derived from labour, followed by capital gains or dividends depending on your marginal tax bracket.  There is also an additional 10% surtax added to your tax bill on your provincial taxes above $12,500.


Credit Card Nerd Math

Below we have two charts with the marginal tax rates, the amount of after tax earnings for every dollar earned ($1 - $1 x Tax Rate), the amount needed to take home a dollar ($1 ÷ After Tax Earnings), the tax rate on Canadian eligible dividends and the capital gains tax rate.  The first chart is the provincial marginal tax brackets (not including the surtax) and the second chart is the provincial (with the surtax included) and federal tax combined, estimated marginal tax brackets.



2019 Provincial Marginal Tax Rates in Prince Edward Island

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $31,984

9.8%

$0.902

$1.11

0.97%

4.9%

over $31,984 up to $63,969

13.8%

$0.862

$1.16

4.55%

6.9%

over $63,969

16.7%

$0.833

$1.20

8.56%

8.35%


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Basic Personal Amount: Your first $9,160 in earnings are exempt from provincial income taxes in PEI for 2019.
PEI Surtax: There is a 10% surtax added to the above marginal tax rates when your basic tax payable is greater than $12,500.  The 10% additional surtax will apply to any amount over $12,500 in payable taxes.  The surtax is not based on income, but on tax payable, so different deductions as well as how you earn your income (earning Canadian dividends as an example) will change when the surtax will be added.
Capital Gains: Taxable income derived from capital gains will be reduced by half, making an effective marginal tax rate on capital gains that is 50% of your current marginal tax rate.  For example, if you have $10,000 in capital gains, you would have $5,000 in taxable income from your capital gains.



2019 Combined Federal and Provincial Marginal Tax Rates in PEI

Taxable Income

Tax Rate

$1 After Tax Earnings

Amount Needed to Net a $1

Dividend Tax Rate

Capital Gains Tax Rate

first $31,984

24.8%

$0.752

$1.33

-0.99%

12.4%

over $31,984 up to $47,630

28.8%

$0.712

$1.404

4.53%

14.4%

over $47,630 up to $63,969

34.3%

$0.657

$1.522

12.12%

17.15%

over $63,969 up to $95,259

37.2%

$0.628

$1.592

16.12%

18.6%

over $95,259 up to $147,667

42.7% - 44.37%

$0.556

$1.798

24.56%

22.19%

over $147,667 up to $210,371

47.37%

$0.526

$1.90

28.7%

23.69%

over $210,371

51.37%

$0.486

$2.056

34.23%

25.69%


Federal Personal Amount: Your first $12,069 in earnings are exempt from Federal taxes in 2019.


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Tax on Eligible Dividends in PEI

Eligible Canadian dividends that you have received will be grossed up by 38%.  You will also be given a 10.5% provincial dividend credit as well as a 15.0198% federal dividend tax credit on your grossed up dividends.
    Someone at the 9.8% marginal tax bracket will have a tax bracket of 0.966% on dividends received at the provincial level.  (($1 x 1.38 x 9.8%) - ($1.38 x 10.5%)) ÷ $1 = -0.966%.
    In the same bracket when combined with the federal tax on dividends, you would have a -0.99% marginal rate on dividends received.  (($1 x 1.38 x 24.8%) - ($1.38 x 25.5198%)) ÷ $1 = -0.9933%

How the math works;

  • first off your $1 in dividends will increase your taxable income by ($1 x 1.38) = $1.38
  • You will get a dividend tax credit of ($1.38 x 10.5%) = $0.1449
  • You will be taxed on your $1.38 at 9.8% and will have your taxes reduced by $0.1449
  • This works out to ($1.38 x 9.8% - $0.1449) = -$0.0966 in net taxes on your dividends
  • The effective tax rate would be -0.97% on dividend received

For the other tax brackets, we will assume that you are getting paid $1 in dividends as well to keep the calculations simple.

  • At the second bracket the tax on dividends paid would be ($1.38 x 13.8% - $0.1449) ÷ $1 = 4.55%
  • At the third bracket the tax on dividends paid would be ($1.38 x 16.7% - $0.1449) ÷ $1 = 8.56%

Provincial Tax Rates: Provincial Tax Rates 2019
PEI Personal Tax Credit
Federal Tax Rates: Federal Tax Rates 2019
Federal Dividend Tax Credit: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns409-485/425-eng.html