Key Takeaways

  • Delaware has progressive income tax rates from 2.2% to 5.95%.
  • Social Security and up to $2,000 in pension income are exempt from taxation.
  • Delaware residents may claim several state tax credits, including personal, child care, and earned income credits.
  • The state has no sales tax but does have a gross receipts tax for businesses.
  • Delaware does not tax inheritances or gifts and offers several tax benefits to retirees.
  • Filing thresholds and itemized deduction rules largely follow federal guidelines, with some state-specific adjustments.
  • Delaware offers online services for filing, payment, and tax form access through the Delaware Division of Revenue.

What is the Delaware Income Tax?

Delaware income tax is tax charged by the State of Delaware with regard to one’s level of income made in the state. Essentially, everyone who earns income is taxed at both the federal level as well as the state level. Therefore, if someone works in Delaware, regardless of whether or not they are a resident of that state, that person will be charged federal income tax, Delaware income tax, and state income tax in the state he or she currently resides in.

Overview

Notably, the State of Delaware has low taxes. What’s more, the state doesn’t charge a sales tax, which is why Delaware is often a top choice for people to purchase those large-ticket items come holiday shopping time. Even property taxes are astronomically low—in fact, property taxes are the fourth lowest nationwide. The state income tax is even lower. Rates range from as little as 0 percent to roughly 7 percent for those earning in the highest income bracket.

Some key points regarding Delaware income tax include:

  • Delaware’s state income tax does not allow an expanded income tax bracket for couples filing jointly.
  • The Delaware income tax return is filed by one with an adjusted gross income of $9,400 or greater for those filing either single or married but filing separately, or $15,450 or greater for a married couple filing jointly.
  • There is no tax on Social Security income (SSI) in Delaware.
  • Pension plans and SSI can be deducted from income. Note that pensions can reduce only up to $2,000 from your eligible income.
  • Itemized deductions in the State of Delaware follow the same protocol as the process done at the federal level. Moreover, itemization on your Delaware state tax form can be done if you itemized on your federal return. Generally, the amount on each return will be the same, with very few minor differences. The tax credit for both state and local taxes must be deducted from the total claimed. You can still claim the Delaware standard deduction if you didn’t itemize on your federal return. It is $6,500 those filing jointly, and for other filings, it’s $3,250.
  • You can find a list of delinquent taxpayers on the Delaware state tax department’s website.

Filing Requirements for Delaware State Income Tax

Delaware residents must file a state income tax return if their adjusted gross income exceeds certain thresholds. For tax year 2024, filing is required if your Delaware AGI exceeds $9,400 for single or married filing separately, or $15,450 for those filing jointly. Part-year and nonresidents must also file if they earned income in the state. Taxpayers can file using Form 200-01 (residents), Form 200-02 (nonresidents and part-year residents), or Form 200-03 NR (composite return for nonresident owners). Delaware offers both paper and online filing through the Delaware Division of Revenue portal.

Tax Credits Offered in Delaware

The State of Delaware provides several tax credits that can help taxpayers, the most noteworthy being the personal credit, equivalent to $110 per exemption stated on your federal income tax return, e.g., if you and your spouse each have one exemption, you’ll have a savings of $220 ($110 x 2).

Other types of credits include:

  • Child Care: 50 percent of federal credit
  • Earned Income: 20 percent of federal credit
  • Volunteer Firefighter: $400 if you are an active volunteer fighter
  • Historic Preservation: This credit is offered to those who encourage and assist in the local renovation and treatment of historic landmarks within the state, which can be confirmed by the Delaware State Historic Preservation Office.

Additional Types of Delaware Tax

Capital Gains Tax: Both short and long term capital gains are taxed at the full percentage of your state income tax.

Property Tax: Such taxes in Delaware are one of the lowest in the country. The average property tax is roughly 0.5 percent. The typical homeowner pays less than $1,500 on an annual basis.

Cigarette Tax: The current cigarette tax is a mere $1.60.

Alcohol Tax: No sales tax applies on the purchase of alcohol; however, a removal tax still applies.

Estate Tax: Such tax applies only to those estates worth in excess of $5.43 million and for decedents who died on or after July 1, 2009. Keep in mind, however, that in the event you inherit an estate of any value, additional taxes apply, including county property, school district property, vocational school district, and municipal property taxes.

Gas Tax: Motorists in Delaware are required to pay gasoline tax of 23 cents/gallon. However, if you drive or own an electric vehicle, then you won’t need to worry about this added cost.

Sales Tax: As a lot of us may know, Delaware does not charge a sales tax on the sale of products or goods. However, a tax is in fact enforced on the gross receipts of businesses. Gross receipts are just what its name implies—the total number of receipts a business gives out to the customers. Businesses and occupational license tax rates range from 0.1037 percent to 2.0736 percent, depending on the line of business.

Personal and Real Property Tax: This type of tax is non-existent. However, as previously noted, other taxes do apply (see supra Estate tax). However, several exemptions exist to those with disabilities or 65 and older (i.e., senior property tax credit).

Inheritance and Gift Tax: While an estate tax may apply depending on the date of death and value of the estate, inheritance and gift tax does not apply in the State of Delaware.

Business Taxes in Delaware

While Delaware does not have a state sales tax, it imposes a gross receipts tax on the total receipts of most businesses operating in the state. Rates vary based on the type of business and can range from 0.0945% to 1.9914%. This tax applies to both goods and services, and businesses must file monthly or quarterly depending on their total revenue. Additionally, Delaware levies a corporate income tax of 8.7% on net income from businesses organized as corporations, though LLCs and partnerships are generally taxed at the individual level.

Delaware Income Tax Rates

If you work in the State of Delaware, it is important to know what tax bracket you fall in. Even if you aren’t a resident of the State, but only an employee of the state, you will be charged state income tax.

There are a total of six income tax brackets in the State of Delaware.

  • 2.2 percent: Incomes ranging between $2,001 and $5,000
  • 3.9 percent: Incomes ranging between $5,001 and $10,001
  • 4.8 percent: Incomes ranging between $10,001 and $20,000
  • 5.2 percent: Incomes ranging between $20,001 and $25,000
  • 5.55 percent: Incomes ranging between $25,001 and $60,000
  • 5.95 percent: Incomes that are $60,001 and over

How to Check Your Refund or Pay Tax Owed

Taxpayers can check the status of their Delaware state income tax refund by using the online refund inquiry tool provided by the Delaware Division of Revenue. To pay any amount owed, individuals can use the Revenue Online portal to make a secure payment by bank draft or credit card. You may also mail payments with your tax return or payment voucher if filing by paper. Electronic filing generally results in faster refund processing and confirmation of receipt.

Tax Deductions and Retirement Income Exemptions

Delaware does not tax Social Security benefits and allows deductions for certain pension and retirement income. For individuals age 60 and over, up to $12,500 in pension and eligible retirement income (including dividends, capital gains, and rental income) is tax-exempt. Taxpayers under age 60 can deduct up to $2,000 of pension income. Additionally, contributions to Delaware College Investment Plans (529 plans) are deductible up to $1,000 per individual or $2,000 per joint return.

Income Tax Withholding and Payment Methods

Delaware employers are required to withhold state income tax from employee wages, which is then remitted to the Delaware Division of Revenue. Individuals with income not subject to withholding, such as self-employment or rental income, may need to make quarterly estimated tax payments. Payment methods include direct debit, credit card, check, and electronic payment via the Revenue Online system. Failure to pay estimated taxes when due may result in penalties and interest.

Frequently Asked Questions

  1. What income is taxable in Delaware?
    Wages, business income, rental income, and most other types of earned income are subject to Delaware state income tax, but Social Security benefits and some pension income are exempt.
  2. Who must file a Delaware state income tax return?
    You must file if your adjusted gross income exceeds $9,400 (single) or $15,450 (married filing jointly), or if you earned income in Delaware as a nonresident.
  3. Does Delaware have a sales tax?
    No, Delaware does not impose a state or local sales tax. However, it does levy a gross receipts tax on businesses for their total sales.
  4. How do I pay Delaware state income tax?
    You can pay online through the Delaware Division of Revenue's Revenue Online portal, by mail, or via electronic funds withdrawal when e-filing.
  5. Is retirement income taxed in Delaware?
    Delaware exempts up to $12,500 of eligible retirement income for those 60 or older, and does not tax Social Security benefits at all.

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