What Is the State Income Tax in Delaware?

Delaware imposes an income tax on residents and those earning income within its borders. This tax funds public services and programs. Understanding Delaware’s state income tax is important for meeting tax obligations. This article overviews how taxable income is determined, applicable tax rates, available deductions and credits, and filing procedures.

Determining Taxable Income in Delaware

Taxable income in Delaware includes most forms of income received by individuals. This encompasses wages, salaries, and tips from employment. Business income, interest from savings and investments, and dividends from stocks are also included. Capital gains from asset sales, rental income, and pension distributions are considered taxable.

Certain income types may be exempt from state taxation. Social Security benefits are fully excluded from Delaware taxable income. Residents aged 60 or older can exclude up to $12,500 of eligible pension or retirement income. Military pay for Delaware residents is subject to tax, regardless of where the service member is stationed.

Delaware Income Tax Rates

Delaware uses a progressive income tax system, where the tax rate increases with taxable income. The state has seven income tax brackets. For instance, income up to $2,000 is taxed at 0%, while income between $2,001 and $5,000 is taxed at 2.2%. A maximum rate of 6.6% applies to taxable income exceeding $60,000. These rates apply to taxable income after all allowable deductions and exemptions.

Available Deductions and Credits

Taxpayers in Delaware can reduce taxable income through deductions or lower tax liability through credits. A deduction reduces income subject to tax, while a credit directly subtracts from the calculated tax owed. Delaware offers a standard deduction, which for 2024 is $3,250 for single filers, heads of household, and married individuals filing separately, and $6,500 for married couples filing jointly. Taxpayers aged 65 or older may claim an additional $2,500 in deductions.

Alternatively, residents can itemize deductions if eligible expenses exceed the standard deduction. Delaware follows federal guidelines for itemized deductions. Common tax credits include a personal credit of $110 for each federal exemption claimed, with an additional $110 for individuals aged 60 or over. The state also offers an Earned Income Tax Credit (EITC), allowing taxpayers to choose between a nonrefundable credit equal to 20% of the federal EITC or a refundable credit of 4.5% of the federal EITC. Other credits exist for taxes paid to another state on income also taxed by Delaware, and for active firefighters or rescue squad members.

Filing Your Delaware State Income Tax Return

Determining residency status is the first step in understanding Delaware income tax filing requirements. A resident is defined as an individual domiciled in Delaware for any part of the tax year or someone who maintains a place of abode and spends more than 183 days there. Non-residents earning income from Delaware sources must also file a Delaware tax return. Part-year residents, those who move into or out of Delaware during the tax year, may choose to file either a resident or non-resident return.

The annual deadline for filing Delaware individual income tax returns is April 30. If a taxpayer cannot file by this date, Delaware grants a six-month extension until October 15. This is an extension to file, not an extension to pay any taxes owed. Payments are still due by the April 30 deadline, and penalties and interest may accrue on underpayments. Taxpayers can file electronically through state portals or tax software, or mail a paper return.

The primary form for resident individuals is Form 200-01; non-residents use Form 200-02. Supporting federal forms, such as Form 1040 and relevant schedules, along with W-2 and 1099-R forms, are required attachments. Tax payments can be made online through the Delaware Division of Revenue’s website, via direct debit or credit card, or by mailing a check with a payment voucher. The Division of Revenue encourages online payments, as refunds for electronically filed returns without errors can be processed more quickly.