Delaware does have a state income tax, and it applies to most residents and workers

Delaware charges a 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. If you work in Delaware or live there, you will see this deduction on your paycheck unless you fall into a narrow group of people who are exempt.

The state also taxes capital gains (profit from selling stocks or property), dividends, and interest income at a flat rate of 5.75%. This is separate from federal income tax, which you owe regardless of where you live.

Delaware does not have a sales tax or property tax, which is unusual among U.S. states. This means the income tax is the state's main source of revenue from individuals, and it applies broadly to most people who earn money in or live in the state.

Key Takeaways

  • Delaware's income tax rate ranges from 2.2% to 5.75% depending on your income bracket, and it is withheld from paychecks automatically.
  • Capital gains, dividends, and interest income are taxed at a flat 5.75% rate in Delaware.
  • Delaware has no sales tax or property tax, making income tax the primary state tax on residents and workers.
  • If you work in Delaware but live in another state, you may owe Delaware income tax on wages earned in the state, depending on your residency status.
  • Retirees over 60 may be exempt from tax on certain retirement income, including pensions and Social Security, under specific conditions.

How Delaware's income tax brackets work

Delaware uses a progressive tax system, meaning the rate increases as your income goes up. You do not pay the highest rate on all your income — only on the portion that falls into each bracket. For example, if you earn $40,000, you pay 2.2% on the first portion, then a higher rate on the next portion, and so on.

The exact brackets change each year because they are adjusted for inflation. In 2024, the brackets started at 2.2% for income under roughly $3,000 and climbed to 5.75% for income over roughly $60,000. Your employer should withhold the correct amount from each paycheck based on the W-4 form you filled out when you were hired.

If you are self-employed or have income that is not subject to withholding, you may need to make quarterly estimated tax payments to Delaware. The Department of Revenue website lists the current year's brackets and payment deadlines.

Who does not have to pay Delaware income tax

Most people who work or live in Delaware owe income tax, but a few groups are exempt. Retirees age 60 and older may exclude certain types of income from taxation, including pensions, annuities, and Social Security benefits — but only if their total income falls below a threshold set by the state. This threshold changes yearly and is based on filing status (single, married, etc.).

Military members stationed in Delaware may have different tax treatment depending on their home state of residency. Some states have reciprocal agreements with Delaware that affect how military pay is taxed. If you are active duty, check with your finance office or the state's Department of Revenue to confirm your status.

Nonresidents who work in Delaware but live in another state may owe Delaware tax only on income earned within the state, not on out-of-state income. However, your home state may also tax you on the same income, so you could owe tax to both states. Some states offer a credit for taxes paid to other states to prevent double taxation.

How to file Delaware state income tax

Most people file Delaware state income tax at the same time they file federal taxes, using Form 1040-DE or a similar state form. The deadline is typically April 15, the same as federal taxes. You can file by mail, electronically through the state's website, or through a tax preparation service.

If you owe money, you can pay online through the Department of Revenue website, by mail, or through an authorized payment processor. If you are due a refund, filing electronically usually gets you the money faster than filing by mail.

Delaware offers free tax preparation help through the Volunteer Income Tax Assistance (VITA) program if your income is below a certain threshold (usually around $60,000). You can find a VITA site near you through the IRS website or by calling 211.

What happens if you work in Delaware but live elsewhere

If you live in another state but work in Delaware, you owe Delaware income tax on the wages you earn in the state. Your employer will withhold Delaware tax from your paycheck just as they would for a Delaware resident. You will then file a Delaware state return reporting only the income you earned in Delaware.

Your home state may also tax the same income, depending on its laws. Some states tax all income earned by residents, regardless of where it was earned. Others tax only income earned within the state. Check your home state's tax rules or speak with a tax preparer to understand your full tax picture.

A few states have reciprocal tax agreements with Delaware, meaning residents of those states who work in Delaware may not owe Delaware tax. Pennsylvania and New Jersey have such agreements with Delaware. If you live in one of these states and work in Delaware, ask your employer's payroll department whether they are withholding Delaware tax — they may not be required to.

Delaware tax credits and deductions you may use

Delaware allows a standard deduction similar to the federal standard deduction, which reduces the amount of income subject to tax. The amount depends on your filing status and age. Filers age 65 and older get a higher standard deduction.

The state also offers a dependent exemption for each child or dependent you claim on your federal return. This further reduces your taxable income. If you pay for child care so you can work, you may be able to claim the federal child and dependent care credit on your Delaware return as well.

Delaware does not offer a state Earned Income Tax Credit (EITC) like some states do, but you can claim the federal EITC if you meet the income and work requirements. This credit can result in a refund even if you owe no tax.

Frequently Asked Questions

Does Delaware tax Social Security benefits?

No, Delaware does not tax Social Security benefits for any resident, regardless of age or income. However, if you are under 60 and receive other types of retirement income (such as a pension or IRA withdrawal), that income is taxable. If you are 60 or older, certain retirement income may be excluded from taxation under the state's retirement income exemption.

What is Delaware's sales tax rate?

Delaware has no state sales tax. This is one of the few states without a sales tax, which is why many people shop there. However, you still owe income tax on wages and investment income, and some counties or cities may have local taxes on specific items.

Do I owe Delaware tax if I only work there part of the year?

Yes, you owe Delaware income tax on all wages earned in the state during the year, even if you worked there for only a few months. Report only the income earned in Delaware on your state return. If you also worked in another state, report that income on that state's return.

Can I claim a credit for Delaware taxes paid if I also owe federal tax?

Delaware taxes are not deductible on your federal return under current law. However, if you paid taxes to both Delaware and another state, you may be able to claim a credit on one state's return for taxes paid to the other state. Check both states' rules or consult a tax preparer.

Where do I send my Delaware state tax return?

Mail paper returns to the Delaware Department of Revenue, Division of Revenue, 82 Wolf Creek Road, Dover, DE 19901. Electronic filing through the state's website or an authorized tax software provider is faster and reduces errors. The state website lists current mailing addresses and electronic filing options.