2024 PEI Personal Tax Brackets and Rates – Marginal and Average
May 2024
For Canadian residents outside of the Province of Prince Edward Island, see this link – E&Y Personal Tax Calculator web site. See below for more information on how to use that site.
AVERAGE TAX RATES VERSUS MARGINAL TAX RATES
Average tax rates relate to approximation of income taxes in relation to total taxable income. If your taxable income is $60,000, and you paid $13,800 in taxes, then your average rate is 23%. ($60,000 times 23% equals $13,800).
A marginal tax rate is the effective tax rate on your next dollar earned or deducted. If your taxable income is $60,000, and you pay $340 on the next $1,000 earned, then your marginal tax rate is 34%. Although your average rate is only 23%, you are in the 34% tax bracket, and that is the rate you will pay. The average rate is lower because you paid lower taxes on your initial income at the lower tax brackets and every Canadian resident receives a basic tax credit as a reduction of their taxes.
When calculating the “extra” tax cost of a specific amount being added to other taxable income, such as an immediate RRSP withdrawal, “marginal tax rates” should be used. An “average” rate is appropriate when estimating taxes based on total income where all sources of income are considered equal. For example, the average tax rate (discounted for the time value of money) may apply to assets being valued for divorce purposes that will be taxed when realized sometime in the future (e.g. in retirement and included with other income) but the marginal rate would be used for amounts to be taxed immediately in addition to existing income.
RATES FOR PRINCE EDWARD ISLANDERS
To view the 2024 tax brackets and related MARGINAL tax rates for Prince Edward Island (combined federal and provincial rates), open the PDF file below.
MARGINAL tax rates for PEI, click here: 2024 Combined Federal and PEI Marginal Tax Rates as of May 10, 2024
Note that there are two pages – one reports the detailed tax rates on “regular’ or “normal” income, such as wages, interest and business income, for all brackets. Page two provides approximate rates using approximate tax brackets for normal income, eligible dividends and ineligible dividends. Taxable capital gains will be 50% of “normal” rates unless a capital gains exemption applies. These tax rates do not take into account “clawbacks” of various benefits. For example, low income people receiving the Guaranteed Income Supplement will have a significant reduction of their Supplement when their income goes up; higher income seniors will have a reduction of their Age Amount and their Old Age Security as their income increases above a certain thresholds; parents with minor children will lose Canada Child Benefits when income exceeds a specified threshold; recipients of Employment Insurance may need to repay a portion of their EI above a certain limit.
To view the AVERAGE tax rates for Prince Edward Island (combined federal and provincial rates), open the PDF file below.
AVERAGE tax rates for PEI (combined with the federal rates), click here: 2024 AVERAGE Tax Rates for PEI
OTHER PROVINCES AND TERRITORIES
For Canadian residents other than Islanders, you can find your own marginal and average tax rates by looking at this E&Y Personal Tax Calculator web site. For the marginal rates, see the Canadian personal tax rates heading and select your province or territory. For the average rates, select the Personal tax calculator for the current year and enter your taxable income. Then look for the column for your average tax rate. There will be a column for your marginal tax rate also, but the previous reference will provide more detail on the effect of tax brackets with respect to marginal rates.
Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum