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.

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.

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

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