Delaware does have state income tax, and it applies to most residents and workers
Delaware charges state income tax on wages, salaries, investment income, and other earnings. The state does not have a sales tax, which is unusual — most states that tax income also tax purchases. If you live in Delaware, work there, or earn money from a Delaware source, you will owe Delaware income tax unless a specific exemption applies to you.
The tax is progressive, meaning the rate increases as your income rises. Delaware's rates range from 2.2% on the lowest bracket to 5.75% on the highest, as of 2024. These rates explore to federal taxable income after you have taken the standard deduction or itemized deductions.
Delaware also taxes capital gains, dividends, and interest at the same rates as ordinary income. There is no separate capital gains rate. If you receive income from investments or sell property at a profit, that income is taxed as part of your total Delaware taxable income.
Key Takeaways
- Delaware residents pay state income tax on wages, investment income, and other earnings at rates between 2.2% and 5.75%, depending on income level.
- Delaware has no sales tax, making it one of only five states without one, though this does not reduce your income tax burden.
- If you work in Delaware but live in another state, you may owe Delaware tax on wages earned there, though your home state may also tax the same income.
- Certain types of income, including military pensions and some retirement distributions, may be partially or fully exempt from Delaware tax.
- You must file a Delaware return if your income exceeds the filing threshold, even if you also file a federal return.
Who must file a Delaware income tax return
You must file a Delaware return if your income exceeds the state's filing threshold. For 2024, the threshold is $12,500 for single filers and $25,000 for married couples filing jointly. These thresholds are based on Delaware taxable income, not federal taxable income, though the two are usually close.
If you are a Delaware resident, you must file even if you have no Delaware tax due, as long as you meet the income threshold. Non-residents who earned income from a Delaware source — such as wages from a Delaware employer — must also file if their Delaware-source income exceeds the threshold.
You may want to file even if you are below the threshold. If you had Delaware income tax withheld from paychecks or made estimated tax payments, filing allows you to claim a refund of any overpayment.
Delaware tax brackets and rates for 2024
| Income Range (Single Filers) | Tax Rate |
|---|---|
| $0 to $2,000 | 2.2% |
| $2,001 to $5,000 | 3.9% |
| $5,001 to $10,000 | 4.6% |
| $10,001 to $20,000 | 5.2% |
| $20,001 and above | 5.75% |
Married couples filing jointly have different bracket thresholds — each bracket is roughly double the single filer amount. The top rate of 5.75% applies to married couples with taxable income over $40,000.
These brackets are adjusted each year for inflation. The Delaware Division of Revenue publishes updated brackets in the fall for the following tax year. If you are planning your taxes or estimating what you owe, check the current year's brackets on the Division of Revenue website rather than relying on prior-year numbers.
Income that is exempt or partially exempt from Delaware tax
Delaware exempts certain types of income entirely. Military pensions paid to Delaware residents are not taxed by the state. Distributions from may have access to retirement accounts — including traditional IRAs, 401(k)s, and similar plans — are also exempt from Delaware tax if you are over 59½ or meet other may have access to conditions.
Social Security benefits are not subject to Delaware income tax. This applies to all recipients, regardless of age or income level. If Social Security is your only income, you will not owe Delaware tax.
Some types of interest income may be exempt. Interest from U.S. Treasury bonds and certain other federal obligations is exempt from state tax, though it is still subject to federal tax. Interest from Delaware municipal bonds is also exempt from Delaware tax.
How Delaware taxes non-residents and out-of-state workers
If you live outside Delaware but work there, you owe Delaware income tax on the wages you earn in the state. Delaware taxes you on income from a Delaware source regardless of where you live. This means you may owe tax to both Delaware and your home state on the same income.
Most states that tax income offer a credit for taxes paid to other states, which prevents you from being taxed twice on the same dollar. However, the credit is usually limited to the lower of what you paid to the other state or what you would owe to your home state. You will need to file returns in both states and claim the credit on your home state return.
If you are a non-resident with Delaware-source income, you file Form 1040-NR (Delaware) or the equivalent non-resident return. You report only the income earned from Delaware sources, not your total income from all states.
Filing your Delaware return and paying taxes owed
Delaware residents file using Form 1040 (Delaware Individual Income Tax Return). Non-residents file Form 1040-NR. Both forms are available on the Delaware Division of Revenue website. You can file by mail or electronically through the state's online system.
If you expect to owe tax, you can have it withheld from your paychecks by completing a W-4 form with your employer. Delaware uses the federal W-4, so you do not need a separate state form. If you are self-employed or have income not subject to withholding, you may need to make estimated tax payments quarterly.
The important date to file your Delaware return is the same as the federal important date, typically April 15. If you file your federal return late and receive an extension, the extension also applies to your Delaware return. Payments are due by the original important date even if you file late.
How Delaware compares to neighboring states on income tax
Pennsylvania, which borders Delaware to the north, has a flat 3.07% income tax rate — lower than Delaware's top rate but higher than Delaware's lowest rate. New Jersey, to the northeast, has a progressive system similar to Delaware's, with rates ranging from 1.4% to 10.75%, making it significantly higher overall.
Maryland, to the west, also uses a progressive system with rates from 2% to 5.75%, nearly identical to Delaware's top rate. However, Maryland's brackets are different, and Maryland also has a sales tax, which Delaware does not.
The lack of a sales tax in Delaware is sometimes cited as an advantage for residents, but it does not offset the state income tax. Your total tax burden depends on your income level, spending habits, and what types of income you receive.
Frequently Asked Questions
Do I have to pay Delaware income tax if I just work there but live in another state?
Yes. Delaware taxes income earned within the state regardless of where you live. You will owe Delaware tax on your wages. Your home state may also tax the same income, but you can usually claim a credit on your home state return for taxes paid to Delaware to avoid double taxation.
Is Social Security taxed in Delaware?
No. Delaware does not tax Social Security benefits. If Social Security is your only income, you will have no Delaware income tax liability. If you have other income, Social Security is not included when calculating your Delaware tax.
What is the important date to file my Delaware return?
The important date is April 15, the same as the federal important date. If you receive a federal extension, the extension also applies to Delaware. However, any taxes owed are still due by April 15 even if you file late.
Can I deduct federal income tax paid on my Delaware return?
No. Delaware does not allow a deduction for federal income tax paid. You calculate Delaware tax based on your Delaware taxable income after taking the standard deduction or itemizing deductions, but federal tax is not deductible.
Does Delaware tax retirement account withdrawals?
Withdrawals from may have access to retirement accounts like 401(k)s and traditional IRAs are exempt from Delaware tax if you meet age or other may have access to conditions. However, withdrawals from non-may have access to accounts or accounts that do not meet the exemption criteria are taxed as ordinary income.