Table of Contents

• Form PE428, Prince Edward Island Tax and Credits
• Step 1 - Prince Edward Island tax on taxable income
• Step 2 - Prince Edward Island non-refundable tax credits
• Step 3 - Prince Edward Island tax
• Step 4 - Prince Edward Island low-income tax reduction

The information in this section will help you complete Form PE428, Prince Edward Island Tax and Credits.

The terms spouse and common-law partner are defined on page 12 of the General Income Tax and Benefit Guide.

The term end of the year means December 31, 2001, the date you left Canada if you emigrated in 2001, or the date of death for a person who died in 2001.

Tax tip
A growing number of Prince Edward Island tax measures are distinct from corresponding federal measures. However, many rules relating to calculating Prince Edward Island tax are still based on the federal Income Tax Act. As a result, you may find it easier to calculate your federal tax first. Your total taxes payable will be the same, no matter which tax you calculate first.

Form PE428, Prince Edward Island Tax and Credits

Complete Form PE428 if you were a resident of Prince Edward Island at the end of the year.

If you had income from a business with a permanent establishment outside Prince Edward Island, complete Form T2203, Provincial and Territorial Taxes for 2001 - Multiple Jurisdictions, before you complete Form PE428.

You also have to complete Form PE428 if you were a non-resident of Canada in 2001 and you earned income from employment in Prince Edward Island, or received income from a business with a permanent establishment only in Prince Edward Island.

Step 1 - Prince Edward Island tax on taxable income

Enter, on line 1, your taxable income from line 260 of your return. Use this amount to determine which one of the three columns you have to complete. Enter this amount on line 2 of the applicable column and complete the calculation.

Step 2 - Prince Edward Island non-refundable tax credits

Prince Edward Island now has its own non-refundable tax credits. These credits reduce the amount of provincial tax you owe. However, if the total of these credits is more than the amount of provincial tax you owe, you will not get a refund for the difference.

The eligibility criteria and rules for claiming the Prince Edward Island non-refundable tax credits are the same as for the federal non-refundable tax credits. However, the value and calculation of most Prince Edward Island non-refundable tax credits are different from the corresponding federal credits.

To calculate some of the non-refundable credits, you will need to use the new Provincial Worksheet in this book.

Newcomers to Canada and emigrants

If you prorated any of the amounts you claimed on lines 300 to 306, 315 and 316 of your federal Schedule 1, you are required to perform the same pro-ration on the corresponding provincial amounts at lines 5804 to 5820, 5840 and 5844.

Line 5804 - Basic personal amount

Claim the basic personal amount of $7,412.

Line 5808 - Age amount

You can claim this amount if you met the rules for claiming it on line 301 of your federal Schedule 1. Enter on line 5808 the same amount that you entered on line 301.

Line 5812 - Spouse or common-law partner amount

You can claim this amount if you met the rules for claiming it on line 303 of federal Schedule 1 and your spouse or common-law partner's net income (line 236 of his or her return, or the amount that it would be if he or she filed a return) is less than $6,923.

If your spouse or common-law partner's net income is:

• $629 or less, enter $6,294 on line 5812; or
• more than $629 but less than $6,923, complete the calculation to determine your claim and enter the result on line 5812.

Note
Enter your marital status and the information about your spouse or common-law partner (including his or her net income, even if it is zero) in the Identification area on page 1 of your return.

Line 5816 - Amount for an eligible dependant

You can claim this amount if you met the rules for claiming it on line 305 of federal Schedule 1 and your dependant's net income (line 236 of his or her return, or the amount that it would be if he or she filed a return) is less than $6,923.

If your dependant's net income is:

• $629 or less, enter $6,294 on line 5816; or
• more than $629 but less than $6,923, complete the chart for line 5816 on the Provincial Worksheet in this book to calculate your claim.

If you have not already completed the federal Schedule 5, complete and attach it to your return.

Line 5820 - Amount for infirm dependants age 18 or older

You can claim this amount if you met the rules for claiming it on line 306 of federal Schedule 1 and your dependant's net income (line 236 of his or her return, or the amount that it would be if he or she filed a return) is less than $7,412.

Complete the chart for line 5820 on the Provincial Worksheet in this book to calculate your claim.

Line 5824 - Canada Pension Plan or Quebec Pension Plan contributions through employment

Enter on this line the amount you claimed on line 308 of federal Schedule 1.

Line 5828 - Canada Pension Plan or Quebec Pension Plan contributions on self-employment and other earnings

Enter on this line the amount you claimed on line 310 of federal Schedule 1.

Line 5832 - Employment Insurance premiums

Enter on this line the amount you claimed on line 312 of federal Schedule 1.

Line 5836 - Pension income amount

You can claim this amount if you met the rules for claiming it on line 314 of federal Schedule 1. Enter on line 5836 the same amount that you entered on line 314.

Line 5840 - Caregiver amount

You can claim this amount if you met the rules for claiming it on line 315 of federal Schedule 1 and your dependant's net income (line 236 of his or her return, or the amount that it would be if he or she filed a return) is less than $14,399.

Complete the chart for line 5840 on the Provincial Worksheet in this book to calculate your claim.

Line 5844 - Disability amount

You can claim this amount if you met the rules for claiming it on line 316 of federal Schedule 1.

• If you were 18 or over at the end of the year, enter $4,400 on line 5844.
• If you were under 18 at the end of the year, complete the chart for line 5844 on the Provincial Worksheet in this book to calculate your claim.

Line 5848 - Disability amount transferred from a dependant (other than your spouse or common-law partner)

You can claim this amount if you met the rules for claiming it on line 318 of federal Schedule 1. Complete the chart for line 5848 on the Provincial Worksheet in this book to calculate your claim.

Line 5852 - Interest paid on your student loans

Enter on this line the amount you claimed on line 319 of federal Schedule 1.

Line 5856 - Tuition and education amounts

The tuition and education amounts that you claimed, on line 323 of your federal Schedule 1, may be different than the provincial amounts you calculate.

Complete Part 1 of Schedule PE(S11), Prince Edward Island Tuition and Education Amounts, to calculate your claim.

Receipts - If you are filing a paper return, attach the completed Schedule PE(S11), but not your receipts or other forms. Keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Transferring and carrying forward amounts

You may not need all of your 2001 tuition and education amounts to reduce your provincial income tax to zero. In this case, you may transfer all or part of the unused portion to one person, either your spouse or common-law partner (who would claim it on line 5864), or your parent or grandparent or your spouse, or common-law partner's parent or grandparent (who would claim it on line 5860).

You can only transfer an amount to your parent or grandparent, or your spouse or common-law partner's parent or grandparent if your spouse or common-law partner does not claim an amount for you on line 5812 or 5864.

Complete Part 2 of Schedule PE(S11) to calculate the provincial amount available to transfer, as well as the back of Form T2202, Education Amount Certificate, or T2202A, Tuition and Education Amounts Certificate, to designate who can claim it and the amount the person can claim. This amount may be different from the amount claimed federally by that same person.

Tax tip
If you are transferring an amount to a designated person, do not transfer more than the person can use. That way, you can carry forward as much as possible to use in a future year.

You can carry forward and claim in a future year the part of your tuition and education amounts you do not need to use (and do not transfer) for the year. Complete Part 3 of Schedule PE(S11) to calculate the amount you can carry forward.

Line 5860 - Tuition and education amounts transferred from a child

You can claim this amount if you met the rules for claiming it on line 324 of federal Schedule 1.

Enter, on line 5860, the total of all provincial amounts transferred to you that each student designated on the back of their Form T2202 or T2202A and on line 20 of their Schedule PE(S11). The student may choose to transfer an amount that is less than the provincial amount allowable calculated in Part 2 of his or her Schedule PE(S11).

Note
The student cannot transfer to you any unused tuition and education amounts carried forward from a previous year, but only those from 2001.

See other rules for line 324 in the General Income Tax and Benefit Guide that may apply if the student has a spouse or a common-law partner.

Receipts - If you are filing a paper return, do not include the student's Schedule PE(S11), forms, or official tuition fees receipts, but keep them in case we ask to see them. If you are filing electronically keep all of your documents.

Line 5864 - Amounts transferred from your spouse or common-law partner

You can claim these amounts if you met the rules for claiming them on line 326 of federal Schedule 1. Complete Schedule PE(S2), Provincial Amounts Transferred From Your Spouse or Common-law Partner, to calculate your claim.

Receipts - Do not include any receipts or forms [other than your own Schedule PE(S2)] for your spouse or common-law partner, but keep them in case we ask to see them. If you are filing electronically, keep all of your documents.

Line 5868 - Medical expenses

The allowable medical expenses you can claim on line 5868 are the same as those you can claim on line 330 of your federal Schedule 1. They have to cover the same 12-month period ending in 2001, and have not been claimed in 2000.

Line 5872 - Medical expenses adjustment

If you claimed, on line 5868, medical expenses for a dependant, other than your spouse or common-law partner, whose net income (line 236 of his or her return, or the amount that it would be if he or she filed a return) is more than $7,412, complete the chart for line 5872 on the Provincial Worksheet in this book to calculate your adjustment.

Tax Tip
Provincially, the medical expenses adjustment that you calculate will be less than the amount you calculated federally. If that is the case, and the adjustment you calculate is less than the medical expenses for that dependant, it will be to your benefit to include these expenses at line 5868.

Line 5896 - Donations and gifts

To calculate your claim for line 5896, enter the amounts from lines 345 and 347 of federal Schedule 9 and multiply them by the rates on lines 33 and 34 of Form PE428.

Step 3 - Prince Edward Island tax

Line 38 - Prince Edward Island tax on split income

If you have to pay federal tax on split income on line 424 of your federal Schedule 1, complete Part 2 of Form T1206, Tax on Split Income, to calculate the provincial tax that applies to this income. Form T1206 also contains a special rule that applies to the amount you enter on line 428 of your return. You can find more information about tax on split income on page 14 in the General Income Tax and Benefit Guide.

Line 46 - Prince Edward Island additional tax for minimum tax purposes

If you have to pay minimum tax as calculated on Form T691, Alternative Minimum Tax, you will also have to determine your Prince Edward Island additional tax for minimum tax purposes. To do this, complete Form T1219, Provincial Alternative Minimum Tax, and enter the calculated amount on line 46 of Form PE428. You can find information about minimum tax on page 30 in the General Income Tax and Benefit Guide.

Line 50 - Unused low-income tax reduction available from your spouse or common-law partner

If you had a spouse or common-law partner on December 31, 2001, and he or she did not need all of the low-income tax reduction to reduce his or her Prince Edward Island tax to zero, you can claim, on line 50, the unused amount calculated on his or her Form PE428.

Step 4 - Prince Edward Island low-income tax reduction

You can claim this tax reduction if you were a resident of Prince Edward Island on December 31, 2001, and any of the following conditions applied to you:

• you were 19 years of age or older;
• you had a spouse or common-law partner; or
• you were a parent.

If you had a spouse or common-law partner on December 31, 2001, you and your spouse or common-law partner have to decide which one of you will claim this low-income tax reduction for your family. Any unused amount can be claimed by the other spouse or common-law partner.

You cannot claim this tax reduction if, on December 31, 2001, you were confined to a prison or a similar institution and were there for a total of more than six months during 2001.

Also, you cannot claim the tax reduction for a person who died in 2001.

Line 52 - Basic reduction

Claim $250 for yourself.

Line 53 - Reduction for spouse or common-law partner

Claim $250 if you had a spouse or common-law partner on December 31, 2001.

Line 54 - Reduction for an eligible dependant

Claim $250 if you claimed the amount for an eligible dependant on line 305 of federal Schedule 1 or line 5816 of Form PE428.

Line 55 - Reduction for dependent children born in 1983 or later

Enter beside box 6099 the number of your dependent children that were born in 1983 or later.

Claim $200 for each child.

Do not include a child for whom you claimed the reduction for an eligible dependant on line 54 of Form PE428.

Only one person can claim the tax reduction for a child.

Who is a dependent child?

A dependent child is a person who, on December 31, 2001:

• was 18 years or younger;
• did not have a spouse or common-law partner;
• was not a parent; and
• either lived with you, or was claimed as a dependant only by you or your spouse or common-law partner.

Line 59 - Net family income

If you had a spouse or common-law partner on December 31, 2001, your net family income is the total of your net income (line 236 of your return) and your spouse or common-law partner's net income (line 236 of his or her return or the amount that would appear on line 236 if he or she completed a return).

Note
Enter your marital status and the information about your spouse or common-law partner (including his or her net income, even if it is zero) in the Identification area on page 1 of your return.

Lines 70 to 72 - Unused low-income tax reduction that can be claimed by your spouse or common-law partner

If you had a spouse or common-law partner on December 31, 2001, your spouse or common-law partner can claim, on his or her 2001 return, any amount of the low-income tax reduction that you do not need to reduce your Prince Edward Island tax to zero.

Complete the calculation at lines 70 to 72 to determine the unused amount that your spouse or common-law partner can claim on his or her Form PE428.

Lines 73 to 76 - Prince Edward Island political contribution tax credit

You can deduct part of the contributions you made in 2001 to registered Prince Edward Island political parties or district associations, or to registered Prince Edward Island independent political candidates during an election period.

How to claim

Enter your total contributions on line 73 of Form PE428 and determine the amount to enter on line 74, as follows:

• For contributions of less than $1,150, complete the chart for line 74 on the Provincial Worksheet in this book.
• For contributions of more than $1,150, enter $500 on line 74 of Form PE428.

Receipts - Attach to your paper return official receipts signed by an official of the recognized political party or constituency association, or the candidate's agent. If you are filing electronically, keep your receipts in case we ask to see them.