Tax in Delaware: a complete guide
Delaware offers some of the lowest state taxes in the US and is one of the few states to impose zero state sales taxes.
Let’s take a brief glance at Delaware’s state taxes;
The maximum income tax rate is 6.60 percent
No sales tax
Low property taxes
Delaware’s taxes may be low in relation to the rest of the nation, but they’re far from straightforward.
Delaware income tax
Delaware’s state income tax is based on seven tax brackets.
Delaware's maximum income tax rate is 6.60 percent and applies to incomes of more than $60,000. Even this maximum rivals the blanket statewide income tax in some other states.
| Income bracket | Rate |
|---|---|
| $0 - $2,000 | zero percent |
| $2,000 - $5,000 | 2.20 percent |
| $5,000 - $10,000 | 3.90 percent |
| $10,000 - $20,000 | 4.80 percent |
| $20,000 - $25,000 | 5.20 percent |
| $25,000 - $60,000 | 5.55 percent |
| $60,000+ | 6.60 percent |
Delaware has a notable exception to its statewide income tax in the form of the city of Wilmington, which collects income tax at a flat rate of 1.25 percent from those who live and work there.
Delaware tax deductions
If you claim tax deductions on your federal tax return, you can do the same on your state tax return in Delaware – but only if the two match up. However, if you didn’t claim any deductions federally, you are entitled to the Delaware standard deduction.
The Delaware standard deduction amounts to $6,500 for a couple filing jointly or $3,250 for any other filers (single or head of household). And it doesn’t stop there: filers aged over 65, married to someone who is, and registered blind can claim an additional $2,500 in deductions.
Delaware tax credits
The possibilities for your personal tax return don’t stop there. In Delaware, several income tax credits can reduce your total bill.
The most widely used tax credit is the personal credit, which amounts to $110 for each deduction on your federal income tax return. So, if you have two exemptions on your federal tax return, you can claim a total personal credit of $220. If you have three exemptions, you can claim a personal credit of $330, and so on. Over-60s can also claim an additional $110 in personal credits.
Many more tax credits are available in the state of Delaware, though their amounts change with the tax year. These include:
Child Care Credit
Earned Income Tax Credit
Volunteer Firefighter's Credit
Historic Preservation Tax Credit
Delaware capital gains tax
The state income taxes cover many capital gains. However, there is an exception for real estate. In Delaware, gains from real estate sales by people who live in another state are taxed at six percent.
Delaware sales tax
Delaware has no statewide sales tax, making it a popular destination for out-of-state shoppers. Delaware is one of only four states in the US not to impose state or local sales taxes.
Despite the absence of statewide sales taxes in Delaware, there are still excise duties on alcohol and cigarettes.
| Delaware wine tax | $1.63 per gallon | Wine vendors are responsible for paying a state excise tax of $1.63 per gallon, plus Federal excise taxes, for all wine sold in Delaware. |
|---|---|---|
| Delaware beer tax | $0.26 per gallon | Beer vendors are responsible for paying a state excise tax of $0.26 per gallon, plus Federal excise taxes, for all beer sold in Delaware. |
| Delaware liquor tax | $4.50 per gallon | Liquor is subject to a state excise tax of $4.50 per gallon in Delaware. |
| Delaware cigarette tax | $2.10 per pack | "In Delaware, cigarettes are subject to a state excise tax of $2.10 per pack of 20. |
| In addition, wholesalers have to pay a 30 percent tax on other tobacco products." |
Delaware property tax
Delaware is home to some of the lowest property taxes in the US, with the state’s average property tax being around 0.53 percent.
Delaware estate tax
An estate tax has been abolished relatively recently in the state of Delaware. Until 2018, an estate tax applied to estates valued at more than $5.49 million.
Delaware motor tax
Delaware drivers will face excise taxes on gasoline. Regular gas has a state excise of $0.23 per gallon, and diesel has a rate of $0.22 per gallon.
Delaware retirement tax
Some of Delaware’s tax deductions for seniors have been covered earlier in this guide. However, there are more details as to how the state of Delaware handles retirement income.
In addition to the deductions available to seniors and their spouses, Social Security is not taxed as part of a person’s income in Delaware. The absence of a state sales tax in Delaware also means seniors can save money on some essential items.
The bottom line
There are a lot of details when it comes to Delaware’s tax offering for residents. With many opportunities to reduce your income tax bill, especially in the form of deductions and credits, Delaware can be an attractive prospect for some – especially relative to some of its neighboring states.
A financial advisor can ensure you’re not paying any more tax than you need to. Find your financial advisor with Unbiased.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.