On May 25, the PEI government released its 2023 budget. The following are highlights of the key tax measures.
Personal tax measures
Beginning in 2024, five new personal income tax brackets will replace the current three personal income tax brackets and the 10 per cent surtax that applies to PEI income tax in excess of $12,500.
| 2023 PEI personal tax brackets | Proposed 2024 PEI personal tax brackets | |||
| Income | Tax rate | Income | Tax rate | |
| $0 to $31,984 | 9.8% | $0 to $32,656 | 9.65% | |
| $31,984 to $63,969 | 13.8% | $32,656 to $64,313 | 13.63% | |
| $63,969 to $100,664* | 16.7% | $64,313 to $105,000 | 16.65% | |
| Over $100,664* (due to surtax) | 18.37% | $105,000 to $140,000 | 18% | |
| $140,000 and above | 18.75% | |||
* Assuming the only available credit was the former $12,000 basic personal amount, the PEI provincial tax would be $12,500 upon attaining $100,664 of taxable income, at which point every additional dollar is subject to a 10 per cent surtax. The 16.7 per cent top tax rate is multiplied by 1.1 to arrive at what is, in effect, a fourth tax bracket.
The personal combined income tax rates for 2023 and the proposed rates for 2024 are outlined below:
| Personal (combined) federal and PEI top marginal tax rates | ||
| Current 2023 rate | Proposed 2024 rate | |
| Interest/regular income | 51.37% | 51.75% |
| Capital gains | 25.69% | 25.88% |
| Eligible dividends | 34.22% | 36.20% |
| Non-eligible dividends | 47.05% | 47.63% |
Personal tax credits
The budget proposes the following changes to personal tax credits, as well as other amounts:
- Basic personal amount – The basic personal amount for 2023 will increase to $12,750 from the currently enacted $12,000, effective Jan. 1, 2023. The basic personal amount for 2024 will be $13,500.
- Spouse or common‑law partner amount and the amount for an eligible dependent – The amount for these credits for 2023 will increase from the currently enacted $10,192 to $10,829, and the amount for 2024 will be $11,466 for 2024.
- Age amount – The budget increases the amount for this credit, available to persons aged 65 and older, from $3,764 to $4,679 for 2023 and to $5,595 for 2024. The budget also increases the income threshold from $28,019 to $30,879 for 2023 and to $33,740 for 2024.
- Low‑income tax reduction – The budget proposes to increase the income threshold for the PEI low-income tax reduction from $20,000 to $20,750 for 2023 and again to $21,500 for 2024.
- Children's Wellness Tax Credit – The maximum amount for the Children's Wellness Tax Credit is proposed to increase from $500 to $1,000 starting in 2024. This credit is available for fees paid for registrations or membership fees for artistic, cultural, recreational, developmental or physical activities.
Corporate tax measures
No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2023 are outlined below:
| Small business corporations | General corporations | |||
| Rate | Threshold | Non-M&P | M&P | |
| PEI | 1.0% | $500,000 | 16.0% | 16.0% |
| Combined federal and PEI | 10.0% | $500,000 | 31.0% | 31.0% |
Other tax measures
Property tax
The budget proposes to continue freezing property tax for the 2023 tax year and introduce legislation to reset assessment rates to levels equivalent to 2020, in order to prevent a sharp rise in property taxes in 2024.
Next steps
Contact your Baker Tilly advisor to learn more about how we can help you navigate the complexities of the Canadian tax system.
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