Delaware State Income Tax

The Delaware state income tax is a levy on the earnings of individuals and corporations registered in the State of Delaware. It is similar to the Federal Income Tax, but there are some differences. It is important to file your taxes on time to avoid penalties. The rate ranges from 2.2% to 6.6% in 2023, depending on taxable income. Pass-through entities, like sole proprietorships and partnerships, must also submit their income tax returns through their owners’ personal tax returns

Most individuals who work in the state are required to pay Delaware state income tax. However, the amount of tax they owe may vary depending on their filing status and other factors. If you have any questions, the state’s taxation website has a helpful FAQ section.

Delaware’s state income tax rates were last changed eleven years ago, and there are six marginal tax brackets for single and married filers. The City of Delaware imposes its own local city tax on corporate revenues, which is payable by filing a City Business Tax Return. The City of Delaware is seeking new revenue to reduce a significant backlog of infrastructure repairs and improve daily life for its residents. The City’s proposal would include a partial credit for City residents who earn income outside of the City limits.

Delaware State Income Tax Exemptions

Individuals in Delaware have a number of deductions and credits they can use to reduce their tax liability. For example, seniors can take advantage of the state’s property tax exemption and a credit for charitable donations. In addition, Social Security benefits are not taxed in Delaware. For businesses, the state has a gross receipts tax that is similar to a sales tax. However, it doesn’t allow businesses to deduct expenses like the cost of goods sold and R&D. The state’s tax rate is lower than that of some of its neighboring states.

Delaware State Income Tax Due Dates

If you are a Delaware resident, the deadline for filing your state income tax is Tuesday, April 15. If you can’t file by this date, you must request an extension by submitting Form 4868 by April 15. An extension does not extend the deadline for paying your taxes.

It is best to file both your federal and Delaware returns simultaneously, as they usually “piggyback” off each other. This will help avoid discrepancies and reduce the chances of errors in both returns.

For businesses, the Delaware corporate income tax is due by March 1 each year. It is based on the company’s taxable net income and its assumed no-par capital and authorized shares. Non-resident shareholders must also pay personal income taxes on their share of S corporation distributive income. Failure to file this tax on time results in a $200 late fee, and repeated penalties can void your corporation’s charter. In addition, a failure to pay the franchise tax can result in interest charges of 1.5% each month on any unpaid balance.