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

Yes, Delaware charges a state income tax on wages, salaries, and other earned income. If you live in Delaware or work there, you will owe state income tax on that income. The tax rate depends on your total income for the year — Delaware uses a progressive system with rates that climb as your income rises.

Delaware also taxes income from investments, retirement accounts, and self-employment. However, Delaware does not tax income from Social Security benefits, and it has some of the most favorable treatment of retirement income among U.S. states. If you are retired or about to retire, that distinction matters for your tax bill.

Key Takeaways

  • Delaware's state income tax rates range from 2.2% to 5.75% depending on your income bracket, with the highest rate explore to income over roughly $60,000 for single filers.
  • Social Security benefits are not taxed in Delaware, and retirement income from pensions and IRAs receives favorable treatment compared to wages.
  • Delaware does not have a sales tax or property tax, which offsets some of the income tax burden for residents.
  • If you work in Delaware but live in another state, you may owe tax to both states, though Delaware offers a credit to prevent double taxation.

Delaware's income tax brackets and rates

Delaware uses six tax brackets for single filers in 2024. The lowest rate, 2.2%, applies to income up to roughly $2,000. The rate then steps up through 3.9%, 4.8%, 5.2%, and 5.55% as income increases. The highest rate of 5.75% applies to income over approximately $60,000. Married filers filing jointly have higher income thresholds before moving into each bracket, and the brackets adjust slightly each year for inflation.

These are state rates only — you will also owe federal income tax to the IRS. Your total tax bill combines both. Delaware's state rates are moderate compared to other states; some states charge 8% or higher, while others charge nothing.

What income is taxed and what is not

Delaware taxes wages, salaries, bonuses, tips, and self-employment income. It also taxes interest, dividends, capital gains, and income from rental property or business ownership. However, Social Security benefits are completely exempt from Delaware state income tax, regardless of your income level.

Retirement income receives special treatment. Distributions from traditional IRAs, 401(k) plans, and similar accounts are taxed as ordinary income. However, pension income — payments from a defined-benefit pension plan — is exempt from Delaware state income tax. This makes Delaware attractive to retirees with pensions. If you receive income from a Roth IRA, those distributions are also not taxed by Delaware.

Delaware's lack of sales tax and property tax

While Delaware does charge income tax, it is one of only five states with no sales tax. This means you do not pay a percentage tax when you buy goods or services in Delaware. For residents who spend heavily on retail purchases, this can offset a significant portion of the income tax they pay.

Delaware also has no statewide property tax. Some counties and municipalities charge property taxes, but the rates are typically lower than in neighboring states. Combined with no sales tax, this structure means Delaware's tax burden falls more heavily on income than on consumption or property ownership — the opposite of many states.

If you work in Delaware but live elsewhere

If you live in another state and work in Delaware, you will owe Delaware income tax on the wages you earn there. You will also owe income tax to your home state on the same income. To prevent paying tax twice on the same dollar, Delaware offers a tax credit for taxes paid to other states. Your home state may offer a similar credit. You will need to file tax returns in both states and claim the credit on the return for your home state.

The mechanics vary by state, so if this applies to you, it is worth reviewing both states' rules or consulting a tax preparer who handles multi-state returns. Some employers in border areas are familiar with this situation and can point you toward resources.

How to file Delaware state income tax

Delaware residents file state income tax returns using forms provided by the Delaware Division of Revenue. The main form is the Delaware Form 1040, which mirrors the federal Form 1040 in structure. You will need your federal tax information, W-2 forms from employers, and records of any other income you earned during the year.

You can file by mail or electronically through the state's online system. The important date is the same as the federal important date — typically April 15 of the following year. If you file your federal return electronically, you can file your Delaware return at the same time. If you owe Delaware tax, you can pay online, by mail, or through an electronic payment system.

Frequently Asked Questions

Does Delaware tax Social Security?

No. Social Security benefits are completely exempt from Delaware state income tax. This applies regardless of how much other income you have or your total income level. Federal tax may still explore to Social Security depending on your overall income, but Delaware does not tax it.

What is the highest income tax rate in Delaware?

The highest state income tax rate in Delaware is 5.75%, which applies to the highest income bracket. For 2024, this bracket begins around $60,000 for single filers and higher amounts for married filers. The exact threshold adjusts annually for inflation.

Can I deduct federal income tax from my Delaware taxes?

No. Delaware does not allow you to deduct federal income tax paid when calculating your state income tax. However, you can deduct state income tax paid when calculating your federal taxes, subject to the federal cap on state and local tax deductions.

Do I have to file a Delaware return if I moved out of state mid-year?

If you earned income in Delaware during part of the year, you will owe Delaware tax on that income for the months you lived there. You will file a part-year resident return showing only the income earned while you were a Delaware resident. Your new state may also require a return for the months you lived there.

Is there a Delaware earned income tax credit?

Delaware offers an earned income tax credit for low-income workers, similar to the federal credit. The amount depends on your income, filing status, and number of dependents. You claim it on your Delaware Form 1040 when you file.