Delaware collects state income tax on wages, investment income, and business profits
Yes, Delaware has a state income tax. It applies to residents and part-year residents who earn money within the state. The tax covers wages from employment, income from self-employment, investment returns, rental income, and retirement distributions. Non-residents who work in Delaware may also owe Delaware income tax on earnings from Delaware sources, depending on where they live and work.
Delaware's income tax is separate from federal income tax. You file both a federal return with the IRS and a Delaware return with the Delaware Division of Revenue. The state tax rate varies based on your income level and filing status — Delaware uses a progressive tax system with multiple brackets.
Key Takeaways
- Delaware residents must file a state income tax return if their income exceeds the filing threshold, which varies by age and filing status.
- Delaware's tax rates range from 2.2% to 5.75% depending on your income bracket and filing status.
- You file your Delaware return separately from your federal return, usually by April 15 each year.
- Part-year residents and non-residents who earned money in Delaware may owe Delaware tax even if they do not live there.
Delaware income tax rates and brackets
Delaware uses a progressive tax system with six income brackets. Your tax rate depends on how much you earned and whether you filed as single, married filing jointly, married filing separately, or head of household. The lowest rate is 2.2% on the first portion of income, and the highest is 5.75% on income above a certain threshold.
The income brackets and rates change each year. For the most current brackets, you can check the Delaware Division of Revenue website or your tax forms. Because the brackets shift annually, your tax bill may change even if your income stays the same.
Delaware does not have a separate capital gains tax. Long-term and short-term capital gains are taxed as ordinary income at your regular rate. This differs from some states that tax investment gains differently than wages.
Who must file a Delaware income tax return
You must file a Delaware return if your income exceeds the filing threshold for your age and filing status. For most working-age adults filing as single, the threshold is around $12,500, but this amount changes yearly. If you are 65 or older, the threshold is higher. Married couples filing jointly have a higher threshold than single filers.
Even if your income is below the threshold, you may want to file if you had Delaware income tax withheld from your paychecks. Filing allows you to claim a refund of overpaid taxes. Self-employed people and those with business income should file regardless of the threshold if they had net earnings.
Part-year residents — people who moved to or from Delaware during the tax year — must file if they meet the income threshold for the portion of the year they lived in Delaware. Non-residents who earned income only from Delaware sources may also need to file.
What income is taxed in Delaware
Delaware taxes most types of income. Wages and salaries from employment are taxed. Self-employment income, rental income, and income from a business or partnership are taxed. Interest and dividend income are taxed. Retirement distributions from IRAs, 401(k)s, and pensions are taxed, though some retirement income may may have access to for a deduction.
Social Security benefits are not taxed in Delaware. This is one of the few income sources exempt from state tax. Some military pensions and federal employee pensions may also receive special treatment, but you should verify the current rules with the Division of Revenue.
Certain deductions and credits can lower your Delaware taxable income. The standard deduction reduces your taxable income before the tax rate is applied. You can also claim itemized deductions if they exceed the standard deduction. Tax credits, such as the earned income tax credit, directly reduce the tax you owe.
How to file your Delaware income tax return
You file your Delaware return using Form 1040DE or Form 1040NR-DE if you are a non-resident. Most people file electronically through tax software or a tax professional. Paper forms are available from the Delaware Division of Revenue website.
The filing deadline is April 15 each year, the same as the federal deadline. If you need more time, you can request an extension, which typically gives you until October 15. An extension delays the filing deadline but does not delay the payment deadline — taxes owed are still due by April 15.
You will need your Social Security number, income documents (W-2s, 1099s, K-1s), records of deductions or credits you are claiming, and information about any Delaware income tax withheld. If you worked for multiple employers or had self-employment income, gather all relevant forms before you start.
Delaware tax withholding from paychecks
If you work in Delaware, your employer should withhold Delaware income tax from your paycheck. The amount withheld depends on the W-4 form you complete and your income level. Withholding is meant to spread your tax bill across the year so you do not owe a large amount on April 15.
If too much tax is withheld, you receive a refund when you file. If too little is withheld, you owe money. You can adjust your withholding by submitting a new W-4 to your employer at any time during the year. This is useful if your income changes, you have a major life event, or you consistently owe or receive a large refund.
Self-employed people do not have withholding taken from their income. Instead, they typically make quarterly estimated tax payments to Delaware and the IRS. These payments are due in April, June, September, and January.
Special situations: part-year residents and non-residents
If you moved to Delaware during the year, you are a part-year resident. You must report all income you earned before and after the move, but only Delaware income tax applies to income earned while you lived in Delaware. Income earned in another state before you moved is subject to that state's tax, not Delaware's.
If you lived outside Delaware all year but worked in Delaware, you are a non-resident. You owe Delaware tax only on income from Delaware sources. You file Form 1040NR-DE instead of the standard return. Income from sources outside Delaware — such as a remote job for an out-of-state company — is not subject to Delaware tax.
Military members stationed in Delaware may have different rules. Some states do not tax military income, and Delaware has specific provisions for active-duty service members. If you are military, check with the Delaware Division of Revenue about how your income is taxed.
Frequently Asked Questions
Does Delaware tax retirement income and Social Security?
Social Security is not taxed in Delaware. Retirement distributions from 401(k)s, IRAs, and traditional pensions are taxed as ordinary income. However, Delaware offers a deduction for certain retirement income, which can reduce the amount you owe. Military pensions and federal employee pensions may may have access to for additional deductions.
What if I worked in Delaware but lived in another state?
You owe Delaware tax on income earned from Delaware sources. You file Form 1040NR-DE. Your home state may also tax the same income, but most states offer a credit for taxes paid to other states to avoid double taxation. Check your home state's rules.
Can I file my Delaware return online?
Yes. Most tax software programs allow you to file Delaware returns electronically. You can also file through a tax professional. Paper forms are available from the Delaware Division of Revenue website if you prefer to file by mail.
What happens if I do not file a Delaware return when I should?
The Delaware Division of Revenue may assess penalties and interest on unpaid taxes. Filing late, even if you do not owe tax, can result in penalties. If you owe money, interest accrues from the original due date. Contact the Division of Revenue if you missed a filing deadline.
Is there a Delaware earned income tax credit?
Yes. Delaware offers an earned income tax credit for low- to moderate-income workers. The credit is based on federal rules but may differ in amount. You claim it on your Delaware return. Check the Division of Revenue website for current income limits and credit amounts.