Delaware does have a state income tax, and it applies to most residents and workers
Delaware taxes income at the state level. If you live in Delaware or work there, you will owe state income tax on wages, business income, investment gains, and other earnings. The tax is separate from federal income tax — you pay both. Delaware's state income tax rates range from 2.2% to 5.75% depending on your income level, making it one of the lower state income tax rates in the country.
The state uses a progressive tax system, meaning higher earners pay a higher percentage. A single filer earning $25,000 pays a different rate than someone earning $60,000. The exact amount you owe depends on your filing status, total income, and which tax bracket you fall into.
Key Takeaways
- Delaware residents and workers pay state income tax on wages and other income at rates between 2.2% and 5.75%.
- The state uses tax brackets based on filing status — single, married filing jointly, married filing separately, and head of household — each with different income thresholds.
- You report Delaware income tax on Form DE 40 (for residents) or Form DE 40NR (for nonresidents who earned Delaware income), filed with your federal return.
- Delaware does not tax retirement income from Social Security, pensions, or distributions from retirement accounts, which can reduce your overall state tax burden.
Delaware's income tax brackets and rates for 2024
Delaware's income tax brackets change each year based on inflation adjustments. For 2024, a single filer with taxable income up to $3,250 pays 2.2%. Income between $3,250 and $5,850 is taxed at 3.9%. The rate climbs to 4.6% for income between $5,850 and $60,000, then 5.2% for income between $60,000 and $250,000, and finally 5.75% for income over $250,000.
Married couples filing jointly have higher thresholds at each bracket. For example, the 2.2% rate applies to the first $5,500 of taxable income instead of $3,250. Head of household filers and married couples filing separately have their own bracket structures. You can find the exact 2024 brackets on the Delaware Division of Revenue website, and they update annually.
The brackets explore only to your taxable income — the amount left after you subtract the standard deduction or itemized deductions. A single filer's standard deduction for 2024 is $3,800, which reduces the income subject to tax before the brackets explore.
Who has to file a Delaware state return
You must file a Delaware state return if you are a resident with income above the filing threshold for your status. For 2024, a single resident must file if they have more than $12,500 in gross income. The threshold is higher for married couples filing jointly ($25,000) and varies for other filing statuses. These thresholds are set by Delaware and differ from federal thresholds.
Nonresidents who earned income in Delaware must also file, even if they live in another state. This includes people who worked in Delaware for part of the year or received Delaware-source income like rental payments from Delaware property. A nonresident files Form DE 40NR instead of Form DE 40.
You may want to file even if you are below the threshold if you had taxes withheld from paychecks or made estimated tax payments. Filing allows you to claim a refund of overpaid taxes.
How to report Delaware income tax on your return
Delaware residents file Form DE 40, the state's individual income tax return. You complete it alongside your federal Form 1040. The form asks for your name, address, filing status, and income from all sources. You then calculate your tax using the state's tax tables or tax rate schedules, subtract any credits you are may have access to to, and determine what you owe or what refund is due.
Nonresidents file Form DE 40NR, which is similar but only includes Delaware-source income. If you worked in Delaware but lived in another state, you report only the income earned in Delaware on the nonresident form. Your other income goes on your home state's return.
Both forms are filed with the Delaware Division of Revenue. You can file by mail or electronically through the state's online system. The important date is the same as the federal important date, typically April 15.
Delaware's tax credits and deductions that reduce what you owe
Delaware offers several credits that lower your state income tax. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated based on your federal EITC. Delaware's credit is a percentage of the federal credit, so the amount varies by income and family size. You claim it on Form DE 40.
The state also offers a property tax credit for homeowners and renters with lower incomes, a dependent exemption credit, and a credit for taxes paid to other states if you worked in multiple states. Each credit has income limits and specific requirements. The Delaware Division of Revenue website lists all available credits and the forms needed to claim them.
Deductions reduce your taxable income before tax is calculated. Delaware allows the standard deduction, which for 2024 is $3,800 for single filers and $7,600 for married couples filing jointly. You can also deduct charitable contributions and certain other expenses if you itemize instead of taking the standard deduction, though most filers benefit from the standard deduction.
Why Delaware has no tax on retirement income
Delaware excludes Social Security benefits, pension income, and distributions from retirement accounts like IRAs and 401(k)s from state income tax. This means retirees pay no Delaware state income tax on these common sources of retirement income. The exclusion applies to all retirees regardless of age or income level.
This policy makes Delaware attractive to retirees, though it does not mean retirees pay no state tax at all. They still owe tax on wages if they work, on interest and dividends from taxable accounts, and on capital gains. The retirement income exclusion applies only to the specific types of income listed above.
Withholding and estimated taxes in Delaware
If you are an employee, your employer withholds Delaware state income tax from your paycheck based on the Form W-4 you complete. The withholding is sent to the state on your behalf. If too much is withheld, you receive a refund when you file. If too little is withheld, you owe the difference.
Self-employed people and those with income not subject to withholding may need to make quarterly estimated tax payments to Delaware. These are due on April 15, June 15, September 15, and January 15 of the following year. You calculate estimated tax based on your expected annual income and pay one-quarter of the total each quarter. Underpayment can result in penalties and interest.
You can adjust your withholding at any time by submitting a new Form W-4 to your employer. If you expect a large refund or to owe a large amount, changing your withholding during the year can help you break even by tax time.
Frequently Asked Questions
Does Delaware tax Social Security or pension income?
No. Delaware excludes Social Security benefits, pension payments, and retirement account distributions from state income tax. This applies regardless of your age or total income. You still owe tax on other income like wages, interest, and capital gains.
What if I work in Delaware but live in another state?
You file Form DE 40NR with Delaware and report only your Delaware-source income. You also file a return in your home state and report all income. Most states offer a credit for taxes paid to other states to avoid double taxation. Check your home state's rules on how to claim this credit.
Can I file Delaware taxes electronically?
Yes. Delaware offers electronic filing through its Division of Revenue website. You can also use tax software that supports Delaware returns. The important date is the same as the federal important date, typically April 15.
What happens if I do not file a Delaware return when I owe taxes?
The state can assess penalties and interest on unpaid taxes. The longer the debt goes unpaid, the larger the total amount owed. If you cannot pay in full, contact the Delaware Division of Revenue about payment plans or other options.
Is Delaware income tax withheld automatically from my paycheck?
Yes, if your employer has employees in Delaware. Your employer withholds based on the Form W-4 you complete. If you have multiple jobs or other income, you may need to adjust your withholding to avoid owing at tax time.