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Delaware Personal Income Tax Laws

Delaware may be known as a corporate tax haven, but that doesn't mean First Staters are exempt from taxes. You thought it was only the feds who take their tax cut? Nope, the state of Delaware wants its share too.

While nobody enjoys paying income taxes, we can stomach it if we know they are going to a good cause. If that's not enough, we hear all the time about those states that don’t have income taxes and wonder why Delaware can’t do the same. But what are the actual laws covering our hard-earned dollars? Here is a brief summary of Delaware personal income tax laws.

Income Tax Laws in Delaware

Most states, including Delaware, levy a personal income tax on residents in addition to federal income taxes. Delaware personal income tax law requires individuals, estates, and trusts within the state to pay between 1 and 5.95 percent on all taxable net income. Certain corporations, partnerships, and trusts may have to pay additional taxes on their income. The basics of Delaware personal income tax law are summarized in the following table.

Code Section Tit. 30 §1102, et seq.
Who is Required to File Individuals, estates, and trusts with Delaware taxable income; Residents and nonresidents of Wilmington are subject to an additional tax of 1.25% on all wages, salaries, commissions, and net profit
Rate First $2,000, no tax; Next $3,000, 2.2%; Next $5,000, 3.9%; Next $10,000, 4.8% Next $5,000, 5.2% Next $35,000, 5.55%; Over $60,000, 5.95%
Federal Income Tax Deductible No
Federal Income Used as Basis Yes

As noted in the chart, Delaware state taxes coexist with federal tax laws. Under basic tax law, both the state and federal government are allowed to tax both unearned and earned income. Earned income includes salary, wages, tips, commissions, bonuses, unemployment benefits, and sick pay. Unearned income includes interest, dividends, profits from asset sales, business and farm income, rent income, royalties, gambling winnings, and alimony. Federal taxes are handled by the Internal Revenue Service (IRS) and are subject to the Internal Revenue Code (IRC). Many IRS forms and publications are available online.

Although a lot of state income tax codes are similar to the federal code, there can be important distinctions in each state that are important to understand before paying your taxes. Most states offer taxpayer assistance programs for those who need help filing their state and federal income tax returns, and many states provide their state tax forms online.

Getting Help with Delaware Personal Income Tax Laws

Tax issues can be the most complicated area of the law. For more introductory information on this topic you can visit FindLaw's extensive tax law section. If you would like legal assistance with a tax issue, you can contact a Delaware tax attorney in your area to discuss your case.

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