Introduction
Delaware is often considered a tax-friendly state, but it does have a state income tax. While there is no state sales tax, Delaware residents and certain non-residents must pay state income tax on earnings.
This guide explains Delaware’s income tax system, tax brackets, filing requirements, and how to reduce your tax liability.
Does Delaware Have a State Income Tax?
Yes, Delaware has a progressive state income tax system with rates ranging from 2.2% to 6.6%. Higher income earners pay a higher percentage of their taxable income.
Delaware Income Tax Brackets for 2024
| Taxable Income | Tax Rate |
|---|---|
| Up to $2,000 | 0% |
| $2,001 – $5,000 | 2.2% |
| $5,001 – $10,000 | 3.9% |
| $10,001 – $20,000 | 4.8% |
| $20,001 – $25,000 | 5.2% |
| $25,001 – $60,000 | 5.55% |
| Over $60,000 | 6.6% |
Who Needs to Pay Delaware Income Tax?
1. Delaware Residents
- If you live in Delaware full-time, you must pay state income tax on all earnings, including wages, self-employment income, rental income, and investments.
2. Non-Residents Earning Income in Delaware
- If you work in Delaware but live in another state, you must file a Delaware non-resident return (Form 200-02) for earnings from Delaware sources.
3. Part-Year Residents
- If you moved into or out of Delaware during the tax year, you may be taxed only on income earned while a Delaware resident.
How to File Delaware State Income Taxes
Step 1: Gather Tax Documents
- W-2s from employers.
- 1099-NEC for freelancers and contractors.
- Form 200-01 (Full-Year Residents) or Form 200-02 (Non-Residents & Part-Year Residents).
Step 2: Choose Filing Status
- Single
- Married filing jointly
- Married filing separately
- Head of household
Step 3: Claim Deductions & Credits
- Standard deduction: $3,250 (Single) or $6,500 (Married).
- Itemized deductions (if higher than the standard deduction).
- Tax credits for seniors, low-income earners, and families.
Step 4: File & Pay Taxes
- E-file through Delaware’s Division of Revenue.
- Mail paper returns to the Delaware Division of Revenue.
- Pay any balance due online or via check.
Tax Deductions & Exemptions in Delaware
Standard Deduction vs. Itemized Deductions
- Delaware allows a standard deduction or itemized deductions.
- Itemized deductions include mortgage interest, medical expenses, and charitable contributions.
Retirement Income Tax
- Social Security is not taxed in Delaware.
- Up to $12,500 in retirement income (pensions, IRAs, 401(k)s) is exempt for taxpayers over 60.
Delaware Tax Benefits
No state sales tax.
- Low property taxes compared to the national average.
- No inheritance tax or personal property tax.
IRS Compliance & Required Tax Forms
- Form 1040 – Federal income tax return.
- Form 200-01 – Delaware resident tax return.
- Form 200-02 – Delaware non-resident tax return.
- Form PIT-RES – Estimated tax payments for self-employed individuals.
Conclusion
Delaware has a state income tax with rates up to 6.6%, but no sales tax and several deductions make it a tax-friendly state. Understanding Delaware’s tax laws helps residents reduce their tax burden and stay compliant.
For expert Delaware tax guidance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. Do I have to pay Delaware state income tax?
Yes, if you live in Delaware or earn income from Delaware sources.
2. Does Delaware tax retirement income?
Social Security is not taxed, and up to $12,500 of other retirement income is exempt for those over 60.
3. How do I file Delaware state taxes?
File Form 200-01 (Residents) or Form 200-02 (Non-Residents & Part-Year Residents) through Delaware’s e-file system or by mail.
4. Does Delaware offer tax credits?
Yes, Delaware offers senior tax credits, child tax credits, and deductions for homeowners.
5. Should I hire a CPA for my Delaware taxes?
Yes, a CPA ensures accurate tax filing, maximized deductions, and IRS compliance.
About Our CPA
Anshul Goyal, CPA EA FCA is a licensed Certified Public Accountant and an IRS Enrolled Agent (EA). He specializes in Delaware state taxes, tax planning, and compliance for individuals and businesses.
Schedule a consultation today with Anshul Goyal, CPA, for personalized Delaware tax strategies.