Delaware State Tax: Everything You Need to Know
Delaware state tax is lower than any other state in the country, which is one of the reasons why so many businesses incorporate there.3 min read
2. Income Tax
3. Delaware Sales Tax
4. Personal and Real Property Taxes
Delaware state tax is lower than any other state in the country, which is one of the reasons why so many businesses incorporate there, even if their primary functions are taking place elsewhere. Additionally, if you have a lot of back-to-school or holiday shopping to do, then Delaware is the place to go, as the state does not have a sales tax.
Looking to move or purchase a beachside vacation home? Again, Delaware may be the place you want to settle, given the low property taxes. Additionally, there is not an inheritance tax in Delaware, and you can easily transfer stocks between individuals, without taxation.
Delaware as a Tax Shelter
You have probably heard the term tax shelter, whether on the news or watching a police procedural on television, but you may not fully know what that means. Simply put, a tax shelter is anything that manages to reduce taxable income, thus resulting in a reduction of what you are expected to pay in taxes; this can be accomplished by both individuals and corporations. For the following reasons, Delaware is considered a tax shelter, insofar as corporations are concerned:
•A company that is incorporated in Delaware, but actually doing business someplace else, does not have to pay income tax on goods and services.
•There is no sales tax in Delaware. As such, if a company is registered in Delaware, even if they are physically conducting business elsewhere, their customers or clients do not have to pay sales tax.
•Should you want to be physically based in Delaware, you can own your office space and pay significantly less in property tax than you would in most other localities.
•While Delaware does have franchise and LLC taxes, they are much lower than other parts of the country, at a flat rate of only $100 and $250, respectively.
•Other investment income earned by a Delaware holding company is not subjected to corporate taxes.
Additionally, Delaware is known for providing certain corporate protections for business owners, as their personal information, such as addresses, are not public information.
While Delaware does not implement a sales tax as it pertains to the consumers, businesses are taxed on their gross receipts. The gross receipts are essentially the total receipts without any deductions.
The income tax situation is another reason why Delaware can be such an appealing place to either live or do business. (Or, both!) There are currently seven tax brackets in Delaware on which your income could be taxed, ranging from 0 percent to 6.6 percent, which is still quite a bit lower than many other places in the United States. Only if you live in the city of Wilmington are you required to pay a tax to that locality, at a rate of 1.25 percent.
Retirees are provided some additional tax benefits, as Social Security and pension income is not taxed up to $2,000.
Should you be a firefighter or rescue worker, you may also get to apply for income tax credit for up to $400 for the purchase of your uniforms and other work-related items.
Delaware Sales Tax
With no sales tax, it is easy to see why Delaware is such a beacon of shopping. While consumers are not subjected to a sales tax, there are licensing taxes involved with being a business owner in Delaware, the range of which can vary depending upon the categorization of the business activities.
Personal and Real Property Taxes
Imagine not having to pay real estate taxes on your house! Well, that is a benefit of being a property owner in Delaware. With that said, it does not mean that you are entirely off the hook, as there are certain counties that do implement a property tax, even if one does not exist at the state level. Additionally, you may be required to pay school district property taxes and vocational school property taxes.
While you are not required to pay taxes on personal property, either, you are required to register the ownership of your personal property, with the state; the exception to this being your vehicle.
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