Delaware Tax Rates

This post provides an overview of the primary taxes levied at the state level in Delaware. The information contained here is intended for general reference. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Delaware imposes a graduated individual income tax with multiple tax brackets.

  • Tax Rates: Rates range from 2.20% to a top marginal rate of 6.60%. The maximum rate applies to taxable income exceeding $60,000 for all filing statuses. Lower income levels may be exempt, with a 0% rate on the first $2,000 of taxable income.
  • Deductions and Exemptions: Delaware allows a standard deduction or itemized deductions similar to the federal system.
    • Retirement Income: Residents aged 60 or older can exclude up to $12,500 of eligible pension or retirement income. Social Security benefits are fully excluded from taxable income.
  • Local Income Tax: The city of Wilmington imposes a separate local income tax on residents and non-residents who work within the city.

Sales and Use Tax

Delaware is one of the few states that does not levy a state or local general sales tax. This absence is a significant factor in the state’s commercial appeal.

  • No State Sales Tax: Consumers do not pay tax at the point of sale for retail goods or services.
  • No Local Sales Tax: Local jurisdictions are prohibited from imposing their own sales taxes.

Property Tax

Property taxes in Delaware are collected exclusively at the local level by counties, municipalities, and school districts, and they are among the lowest in the U.S.

  • Effective Rate: The effective property tax rate on owner-occupied housing value is historically low, typically ranking Delaware near the bottom compared to other states.
  • Assessment: The assessed value of property is based on an old system, often significantly lower than the current fair market value, which contributes to the low tax bills. The local mill rate (or millage rate) is then applied to this assessed value to determine the annual tax owed.
  • Exemptions: Homestead exemptions and property tax relief programs are available for seniors and disabled veterans.

Corporate Income Tax

Delaware imposes a corporate income tax on the net income of corporations derived from sources within the state.

  • Tax Rate: The rate is a flat 8.7% on federal taxable income that is allocated or apportioned to Delaware.
  • Apportionment: For multi-state corporations, Delaware historically used an equally weighted three-factor (property, wages, and sales) apportionment method, but has been moving toward a single sales factor apportionment to determine the portion of income taxable by the state.
  • Exemptions: Corporations incorporated in Delaware but that do not conduct business within the state are typically not subject to the state’s corporate income tax.

Unique Business Taxes

Delaware uses unique business taxes to generate revenue, largely substituting for the lack of a general sales tax.

  • Gross Receipts Tax (GRT): This tax is imposed on the seller of goods or provider of services, rather than on the purchaser (like a sales tax). It is based on the total gross revenues from sales of tangible property or services in the state, with very few deductions allowed.
    • Rate Structure: The rates are low, ranging from approximately 0.0945% to 0.7468%, and vary based on the specific type of business activity.
    • Payment: Businesses must obtain a license and remit the GRT monthly or quarterly, depending on the volume of receipts.
  • Franchise Tax: This is an annual tax levied on the privilege of incorporating in Delaware, regardless of whether the corporation conducts business there. This tax is a major revenue source for the state.

Calculation: The tax is calculated using one of two methods (Authorized Shares or Assumed Par Value Capital), resulting in a tax that can range from a statutory minimum of $175 up to a maximum of $200,000. Limited Liability Companies (LLCs) and Limited Partnerships (LPs) pay a flat annual fee.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.