Delaware has a relatively simple tax system. Its main sources of revenue are the corporate franchise tax, personal income tax, sales and use tax, and property tax. The corporate franchise tax is an annual tax on businesses that are incorporated in Delaware or that have a physical presence in the state. The personal income tax is a progressive tax on income earned by individuals who reside in Delaware or who work in Delaware and earn more than a certain amount. The sales and use tax is a 6% tax on the sale of most goods and services in Delaware. The property tax is a local tax on real estate and personal property.
Delaware Income Tax
Delaware has no personal income tax, meaning that residents do not pay taxes on their income earned from wages, salaries, or tips. This makes Delaware an attractive destination for high-income earners and retirees who wish to minimize their tax burden.
Corporations, however, are subject to a franchise tax on their net income. The franchise tax rate is 6.6% for corporations with taxable income over $6 million and 3.3% for corporations with taxable income of $6 million or less.
In addition to the franchise tax, corporations are also subject to a gross receipts tax of 0.05%. This tax is imposed on the gross receipts from all business activities conducted in Delaware.
The table below summarizes the taxes that businesses and individuals are subject to in Delaware:
| Tax Type | Individuals | Corporations |
|---|---|---|
| Personal Income Tax | 0% | N/A |
| Franchise Tax | N/A | 6.6% for taxable income over $6 million 3.3% for taxable income of $6 million or less |
| Gross Receipts Tax | N/A | 0.05% |
Delaware Sales Tax
Delaware has a 0% sales tax rate, which means that no sales tax is charged on the sale of goods or services in the state.
This makes Delaware one of the most tax-friendly states in the country for shoppers. However, it’s important to note that some localities in Delaware may impose their own sales taxes. For example, the city of Wilmington has a 1% sales tax.
To avoid paying sales tax on your purchases, you can shop in a Delaware county or city that does not have a local sales tax. You can also shop online from retailers that are located outside of Delaware.
Delaware Property Tax
Delaware property taxes are levied by the state’s counties and municipalities. The rates vary depending on the location of the property and the type of property. For example, residential properties are typically taxed at a lower rate than commercial properties.
Property taxes are due twice a year, in June and December. The amount of the tax is based on the assessed value of the property, which is determined by the county assessor. The assessor will consider factors such as the size of the property, the number of bedrooms and bathrooms, and the location of the property when determining the assessed value.
Property owners can appeal their property tax assessment if they believe it is inaccurate. The appeal process varies depending on the county, but it typically involves filing a written appeal with the county assessor’s office.
If you are a homeowner in Delaware, it is important to be aware of the property taxes that you are responsible for paying. Property taxes are a major source of revenue for the state and local governments, and they are used to fund a variety of public services, such as schools, roads, and libraries.
- Property taxes are levied by the state’s counties and municipalities.
- The rates vary depending on the location of the property and the type of property.
- Property taxes are due twice a year, in June and December.
- The amount of the tax is based on the assessed value of the property.
- Property owners can appeal their property tax assessment if they believe it is inaccurate.
| County | Residential Property Tax Rate | Commercial Property Tax Rate |
|---|---|---|
| New Castle County | 0.50% | 1.00% |
| Kent County | 0.45% | 0.90% |
| Sussex County | 0.40% | 0.80% |
Delaware Estate Tax
Delaware is one of the few states that do not have an estate tax. An estate tax is a tax on the transfer of property from a deceased person to their beneficiaries. This is often collected at the state level, but there is also a federal estate tax. Some states have adopted an estate tax “pickup” which taxes certain estates that would have been subject to the federal estate tax before 2018 but are not anymore. However, Delaware does not impose an estate tax pickup.
Taxes Withheld From Wages
- Federal Income Tax: This is the primary source of revenue for the federal government.
- Social Security Tax: This tax is used to fund Social Security benefits.
- Medicare Tax: This tax is used to fund Medicare benefits.
- Delaware Income Tax: This tax is a flat 6.6% and is not progressive like the federal income tax. It is withheld from employee paychecks and is due on April 15th. In addition to the flat tax, Delaware has a gross receipts tax on businesses with more than $500,000 in revenue.
- Local Taxes: Some cities and counties in Delaware impose additional income taxes, property taxes, and sales taxes.
Property Taxes
Property taxes are a major source of revenue for local governments in Delaware. These taxes are based on the assessed value of your property, which is determined by the county assessor. The tax rate is set by the county council. Property taxes are due on July 1st and October 1st.
Sales Tax
Delaware has a 6% sales tax on most goods and services. The tax is imposed on the total purchase price, including shipping and handling costs. Certain items, such as food, clothing, and prescription drugs, are exempt from the sales tax.
Other Taxes
- Fuel Tax: Delaware imposes a 23 cents per gallon tax on gasoline and a 27 cents per gallon tax on diesel fuel.
- Tobacco Tax: Delaware imposes a 30 cents per pack tax on cigarettes.
- Alcohol Tax: Delaware imposes a tax on alcoholic beverages based on the type and volume of the beverage.
Conclusion
Delaware has a relatively low tax burden compared to other states. The state does not have an estate tax, property taxes are relatively low, and the sales tax is flat 6%. However, Delaware does have a gross receipts tax on businesses with more than $500,000 in revenue, and some cities and counties impose additional income taxes and property taxes.
Well there you have it, folks! Now you’re an expert in the Delaware tax landscape. Thanks for hanging out and reading this far! If you have any questions or want to learn more about taxes in the First State, don’t hesitate to drop by again. We’ll be here, ready to help you navigate the ins and outs of Delaware’s tax system. See you soon!