Delaware does have a state income tax, and it applies to most residents and workers
Delaware charges state income tax on wages, salaries, and other earned income. The tax rate depends on how much you earn — it ranges from 2.2% on the lowest incomes to 5.75% on the highest. Unlike some states, Delaware does not tax retirement income from pensions or distributions from retirement accounts, which is one reason many retirees move there.
If you work in Delaware or live there, you will owe state income tax on your earnings unless you fall into a specific exemption category. The state also taxes business income, investment income, and capital gains, though the rules for each differ slightly.
Key Takeaways
- Delaware's income tax rate ranges from 2.2% to 5.75% depending on your income bracket, with rates applied progressively.
- Retirement income from pensions, IRAs, and 401(k) withdrawals is not taxed by Delaware, even if you are a resident.
- You owe Delaware income tax if you live in the state or work there, regardless of where you live.
- Delaware does not tax Social Security benefits, military retirement pay, or certain other forms of retirement income.
Delaware's income tax brackets and rates
Delaware uses a progressive tax system, meaning the rate increases as your income increases. For the 2024 tax year, the brackets are:
| Income Range (Single Filer) | 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 ranges, and the brackets adjust each year for inflation. The key point is that you do not pay the top rate on all your income — only the portion that falls into each bracket is taxed at that rate.
What income is not taxed in Delaware
Delaware exempts several types of income from state tax. Retirement income is the largest exemption: distributions from IRAs, 401(k)s, 403(b)s, and pensions are not taxed. This includes both the contributions you made and the earnings that accumulated inside those accounts. Social Security benefits are also exempt from Delaware state tax.
Military retirement pay is not taxed, and neither is income from certain government pensions. Disability income from Social Security (SSDI) and Supplemental Security Income (SSI) are exempt. Some types of investment income, such as gains on the sale of your primary residence up to certain limits, also receive preferential treatment or exemption.
Unemployment benefits are taxed in Delaware, so if you received them, you will owe state income tax on that amount. Interest and dividend income from investments are taxed as ordinary income.
Who must file a Delaware state tax return
You must file a Delaware state income tax return if your income exceeds the filing threshold for your filing status. For 2024, a single person with gross income over $12,500 must file. The threshold is higher for married couples filing jointly and for heads of household. These thresholds change yearly.
Even if your income is below the threshold, you may want to file if you had taxes withheld from your paycheck — filing allows you to claim a refund. If you are self-employed, you must file if your net earnings from self-employment are $400 or more, regardless of your other income.
How to pay Delaware income tax
If you are an employee, your employer withholds Delaware income tax from your paycheck based on the W-4 form you complete. The withheld amount is sent to the Delaware Division of Revenue on your behalf. You settle up when you file your tax return — if too much was withheld, you receive a refund; if too little, you owe the difference.
If you are self-employed or have income that is not subject to withholding, you may need to make estimated tax payments quarterly. The Delaware Division of Revenue provides a worksheet to calculate what you owe. Payments are due on April 15, June 15, September 15, and January 15 of the following year.
You file your Delaware state return using Form 1040-DE or Form 1040-NR-DE if you are a nonresident. The deadline is typically April 15, the same as the federal deadline. You can file by mail or electronically through the state's website.
Delaware income tax for nonresidents and part-year residents
If you worked in Delaware but lived in another state, you still owe Delaware income tax on the wages you earned there. You file a nonresident return and report only the income earned in Delaware. You may also owe tax to your home state, but most states offer a credit for taxes paid to other states to prevent double taxation.
If you moved to or from Delaware during the year, you file as a part-year resident. You report income earned while you were a Delaware resident on the Delaware return and income earned while you were a nonresident on the nonresident return. The state provides worksheets to help you allocate income correctly.
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 file a nonresident return reporting only Delaware wages. Your home state may also tax that income, but you can usually claim a credit on your home state return for taxes paid to Delaware.
Is Social Security taxed in Delaware?
No. Delaware does not tax Social Security benefits. If Social Security is your only income, you will not owe Delaware state income tax. If you have other income, you report it separately, but the Social Security portion is exempt.
What happens if I do not file a Delaware tax return?
If you owe tax and do not file, the state may assess penalties and interest on the unpaid amount. If you are owed a refund, you have a limited time to claim it — typically three years from the original due date. Filing, even if you owe nothing, protects you from penalties.
Can I deduct federal income tax from my Delaware state tax?
No. Delaware does not allow a deduction for federal income tax paid. You calculate your Delaware tax based on your federal taxable income, but you cannot reduce it by subtracting what you paid federally.
Does Delaware tax capital gains differently than other income?
Capital gains are taxed as ordinary income in Delaware at the same progressive rates as wages. There is no special lower rate for long-term capital gains at the state level, though the federal tax code may treat them differently.