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Prince Edward Island Income Tax Rates and Brackets 2022

Prince Edward Island (PEI) has a progressive tax system similar to the rest of Canada.

The lowest tax rate in PEI for the 2022 tax year is 9.8% and it applies to income up to $31,984. On the higher end of the spectrum, you pay 16.7% on income exceeding $63,969.

When combined with federal taxes, Islanders pay a marginal tax rate ranging between 24.80% and 51.37%.

Provincial tax brackets are not indexed to the inflation rate in PEI. Thus, the tax brackets and rates in 2021 remain the same for the 2022 tax year.

The minimum wage in PEI is $13.00 per hour. It is expected to increase to $13.70 per hour on April 1, 2022.

You can learn about the tax brackets and rates in the other Atlantic provinces through the links below:

Tax Brackets and Tax Rates in Prince Edward Island

Prince Edward Island Tax Brackets in 2022

The tax brackets and rates applicable to ordinary taxable income in PEI in 2021 and 2022 are:

Taxable IncomePEI Tax Rate 2021/2022
Up to $31,9849.80%
$31,984.01 to $63,96913.8%
$63,969.01 and over16.70%

Basically, you pay:

  • 9.80% on the first $31,984 of taxable income, plus
  • 13.80% on the next $31,985 (i.e. on the portion of taxable income over $31,984 up to $63,969), plus
  • 16.70% on amounts exceeding $63,969

The basic personal amount in PEI is $11,250 in 2022.

On the federal side, the basic personal amount is up to $14,398 in the 2022 tax year.

If you earned $11,250 or less in the 2022 tax year, you won’t be owing provincial or federal taxes.

There is an additional tax or “surtax” in PEI of 10% when your tax payable is greater than $12,500.

Related: TFSA Contribution Limit 2022.

PEI Marginal Tax Rates (Federal and Provincial)

Federal tax rates in 2021 and 2022 are:

2022 Taxable Income2022 Tax Rate2021 Taxable Income2020 Tax Rate
Up to $50,19715%Up to $49,02015%
$50,197.01 to $100,39220.50%$49,020.01 to &98,04020.50%
$100,392.01 to $155,62526%$98,040.01 to $151,97826%
$155,625.01 to $221,70829%$151,978.01 to $216,51129.32%
$221,708.01 and over33%$216,511.01 and over33%

The combined federal and provincial marginal tax rates for Islanders in 2022 are:

Taxable IncomeRegular IncomeCapital GainsEligible Canadian DividendsIneligible Canadian Dividends
Up to $31,98424.80%12.40%-0.99%16.64%
$31,985 to $50,19728.80%14.40%4.53%21.24%
$50,198 to $63,96934.30%17.15%12.12%27.57%
$63,970 to $100,22137.20%18.60%16.12%30.91%
$100,222 to $100,39238.87%19.44%16.98%32.68%
$100,393 to $155,62544.37%22.19%24.57%39.00%
$155,626 to $221,70847.75%23.88%29.23%42.89%
$221,709 +51.37%25.69%34.23%47.05%

The top combined rates for the different types of income are:

  • Ordinary income (e.g. salary): 51.37%
  • Capital gains: 25.69%
  • Eligible Canadian dividends: 34.23%
  • Ineligible Canadian dividends: 47.05%

Only 50% of capital gains is taxable, while Canadian dividends are grossed up.

Your marginal tax rate is how much you pay in taxes for every additional dollar of income. For example, if your taxable income (salary) in 2022 is $65,000, your combined marginal tax rate is 37.20%.

Typically, the marginal tax rate is higher than the average tax rate that you actually pay.

You can use your marginal tax rate to compute your tax refund from contributing to an RRSP.

Prince Edward Island Tax Credits

Tax credits and deductions lower your taxes owing or reduce your taxable income.

Popular federal tax credits include the basic personal amount, age amount, donations and gifts, CPP contributions, caregiver amounts, and several others.

Tax credits and deductions specific to Prince Edward Island include:

  • PEI Low-Income Tax Reduction
  • PEI Volunteer Firefighter Tax Credit

A Children’s Wellness tax credit that was effective on January 1, 2021, was proposed in the 2020-2021 PEI budget.

PEI Low-Income Tax Reduction

A low-income tax reduction (LITR) credit is available to low-income Islanders. To qualify, you must be a resident of PEI on December 31, 2021, and be 19 years of age or older.

The income threshold for receiving the full credit is $20,000 in 2022.

You can claim $350 as an individual, as well as up to $350 for a spouse and $300 per child.

The LITR is a non-refundable tax credit.

PEI Sales Tax Rate

PEI is one of five provinces (ON, NL, NB, NS) that uses the Harmonized Sales Tax (HST) system.

The HST rate in PEI is 15%, of which 10% is provincial tax and the remaining 5% is a federal tax.

A point-of-sale rebate of the provincial component of the HST is provided for purchases of children’s clothing, heating oil, books, and children’s footwear.

How To File Your Tax Return For Free in PEI

Islanders have a variety of options for filing their tax returns, including:

Online Tax Software: You can use a CRA-approved tax program that transmits your tax information securely to the CRA using the internet. These tax software can either be free or paid. Examples include WealthsimpleTax and TurboTax.

Paper Tax Filing: If you had filed your taxes using a paper return in previous years, CRA will send you a paper tax package sometime in February.

Free Tax Filing: Low-income individuals who have a simple tax return may be able to file their taxes using CRA’s automated File My Return telephone service. Alternatively, you may qualify to use a free tax clinic in your area.

Learn more about the tax software we have featured in the review links below:

Frequently Asked Questions

What is considered low income in PEI?

For the purposes of the provincial low-income tax reduction credit, it was $19,000 in 2021 and $20,000 in 2022.

What is the HST in Prince Edward Island?

The sales tax in PEI is 15% and it applies to most goods and services.

What is the tax rate in PEI?

The provincial tax rate ranges from 9.8% to16.8%, depending on your tax bracket.

What are your thoughts about the tax brackets and rates in Prince Edward Island? Let us know in the comments.

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Enoch Omololu, MSc (Econ)

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch is passionate about helping others win with their finances and has been writing about money matters for over a decade. He has been featured or quoted in Forbes, The Globe and Mail, Winnipeg Free Press, Wealthsimple, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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