Introduction
Delaware offers various tax credits and incentives to support small businesses, startups, and corporations. These incentives help reduce state tax liabilities, encourage job creation, and promote business growth. Understanding how to qualify for these programs can help maximize savings and improve cash flow for your business.
This guide provides an overview of Delaware’s top tax credits and incentives, eligibility requirements, and how to apply.
Types of Delaware Tax Credits & Incentives
| Tax Credit/Incentive | Benefit | Who Qualifies? |
|---|---|---|
| New Business Facility Tax Credit | Corporate tax reduction for job creation | New businesses creating 5+ jobs |
| Research & Development (R&D) Tax Credit | Up to 20% of qualified R&D expenses | Tech and innovation companies |
| Delaware Angel Investor Tax Credit | 25% tax credit for investments in startups | Accredited investors |
| Brownfield Redevelopment Credit | Tax credit for cleaning up contaminated properties | Businesses redeveloping eligible sites |
| Work Opportunity Tax Credit (WOTC) | Federal credit for hiring certain employees | Employers hiring veterans, ex-felons, or long-term unemployed |
| Delaware Green Energy Incentives | Tax credits and grants for using renewable energy | Businesses adopting clean energy solutions |
New Business Facility Tax Credit
- Reduces corporate income tax for businesses that create at least 5 new jobs and invest in Delaware.
- The credit applies to each full-time job created and business facility investments.
Eligibility:
- Business must locate or expand in Delaware.
- Must create at least 5 new full-time jobs.
How to Apply:
- Submit an application through the Delaware Division of Revenue.
- Include payroll records and investment details.
- Research & Development (R&D) Tax Credit
- Provides up to 20% of qualified R&D expenses for businesses engaging in innovation and product development.
- Can be used alongside the federal R&D tax credit for additional savings.
Eligibility:
- Must be engaged in scientific or technological research in Delaware.
- Expenses must qualify under IRS Section 41 guidelines.
How to Apply:
- File Delaware Form 2070AC along with corporate tax returns.
Delaware Angel Investor Tax Credit
Provides a 25% state tax credit for investments in Delaware-based startups.
Encourages private investment in early-stage companies.
Eligibility:
- Investors must invest at least $10,000 in a qualified Delaware startup.
- Startups must be less than 10 years old with annual revenue under $5 million.
How to Apply:
- Investors must submit Form AITC-1 to claim the credit.
Brownfield Redevelopment Credit
- Offers tax incentives for businesses that clean up and redevelop contaminated properties in Delaware.
Eligibility:
- Must be a certified Brownfield site under the Delaware Brownfields Development Program.
How to Apply:
- Submit environmental cleanup plans to Delaware DNREC for approval.
Work Opportunity Tax Credit (WOTC)
- Federal tax credit available for businesses hiring individuals from targeted groups.
Eligible Employees Include:
- Veterans
- Ex-felons
- Long-term unemployed individuals
- Food stamp and welfare recipients
How to Apply:
- File IRS Form 8850 and ETA Form 9061 within 28 days of hiring.
- Delaware Green Energy Incentives
- Offers tax credits, grants, and rebates for businesses that invest in renewable energy solutions.
Eligibility:
- Must install solar panels, wind energy systems, or energy-efficient equipment.
How to Apply:
- Apply through the Delaware Green Energy Fund or the Delaware Sustainable Energy Utility (SEU).
How to Claim Delaware Tax Credits & Incentives
Step 1: Determine Eligibility
- Review requirements for each credit.
- Ensure business activities align with Delaware tax incentive programs.
Step 2: Gather Documentation
- Payroll records
- Business investment details
- Environmental compliance reports (if applicable)
Step 3: Submit Applications
- File tax credit forms with the Delaware Division of Revenue.
- Some credits require approval before claiming on tax returns.
Step 4: Work with a CPA
- A CPA can ensure accurate filing and compliance with Delaware tax laws.
Delaware Tax Credit Deadlines
| Tax Credit | Application Deadline |
|---|---|
| New Business Facility Credit | Within 1 year of job creation |
| R&D Tax Credit | April 15 with tax return |
| Angel Investor Tax Credit | Within 6 months of investment |
| Brownfield Redevelopment Credit | Ongoing applications |
| Work Opportunity Tax Credit | Within 28 days of employee hire |
| Green Energy Incentives | Varies by program |
Common Mistakes to Avoid When Applying for Tax Credits
- Missing application deadlines – Some tax credits require advance approval.
- Lack of proper documentation – Businesses must maintain detailed payroll and investment records.
- Assuming all credits apply to every business – Not all businesses qualify for every incentive.
- Failing to coordinate federal and state tax credits – Businesses should claim both federal and Delaware tax incentives for maximum savings.
Conclusion
Delaware offers several tax credits and incentives that benefit small businesses, investors, and job creators. Taking advantage of these programs can help reduce tax liabilities and promote long-term business growth.
For expert tax credit assistance, schedule a meeting with our CPA Anshul Goyal by clicking at https://calendly.com/anshulcpa/ now.
Frequently Asked Questions (FAQs)
1. What are Delaware’s best tax credits for small businesses?
The New Business Facility Tax Credit, R&D Tax Credit, and Angel Investor Tax Credit provide the most significant tax savings.
2. Can I combine Delaware and federal tax credits?
Yes, many Delaware tax credits can be combined with federal tax incentives to maximize savings.
3. How do I apply for the Delaware Angel Investor Tax Credit?
Investors must apply using Form AITC-1 and meet the eligibility requirements.
4. Do green energy incentives apply to commercial buildings?
Yes, Delaware’s Green Energy Fund provides incentives for commercial properties installing solar or wind energy systems.
5. Should I hire a CPA to claim Delaware tax credits?
Yes, a CPA can ensure accurate tax filings and help businesses maximize tax benefits.