Delaware personal income tax is a crucial part of doing business in this state as a non-resident. In this article, let BBCIncorp guide you through the process of filing your personal income tax.
Please be noted that this guide is devoted to non-resident personal income tax at the state level only. For the federal level, please consult an expert.
Who is subjected to personal income tax in Delaware?
You are only subjected to personal income tax in Delaware if you have income from sources within the state.
If you have any gross income from sources inside the state during the tax year, then it is compulsory for you to file a tax return.
If you don’t have any income that is generated inside of Delaware and your spouse files a married separate return, then you do not have to file a Delaware tax return.
You are obligated to file the tax return if:
(1) While being a resident of Delaware, you have income that is generated within the state, or
(2) As a non-resident, you had income from Delaware sources.
For part-year residents, you can choose whether a non-resident form or a resident form to file. Therefore, opt for the one that brings more benefits.
Now, the important question arises: which one is more beneficial?
Example
Let’s take a quick example to best illustrate this situation
Vivian is a part-year resident in Delaware. She has streams of income from Delaware during her period of non-residency during the tax year. In this case, filing Form 200-01 R will bring her more benefits.
However, if during her period of non-residency, she earns her income from other states or even outside of the US, filing Form 200-02 NR will be more beneficial.
What are Delaware personal income tax rates?
Personal income tax rates in Delaware are based on 7 tax brackets with rates being from 0% to 6.6%. As mentioned, those having income from a Delaware source, including a resident, or a Delaware non-resident but received income from the state source, will be subject to personal income tax.
Take a look at the below table for more information:
| If your taxable income is… | Then, the applied tax rate is… |
| US$ 0 – 2,000 | 0% |
| US$ 2,000 – 5,000 | 2.2% |
| US$ 5,000 – 10,000 | 3.9% |
| US$ 10,000 – 20,000 | 4.8% |
| US$ 20,000 – 25,000 | 5.2% |
| US$ 25,000 – 60,000 | 5.55% |
| At least US$ 60,000 | 6.6% |
In our previous article, you can find a detailed breakdown of Delaware taxation, including personal income tax rates
What forms to file and when to file?
To non-residents, you need to file the 200-02 NR form to comply with the personal income tax law in Delaware.
However, as mentioned above, as a part-year resident, you can choose between 200-01 R or 200-02 NR forms to file, whichever is more advantageous to you.
The due date for filing your individual income tax return is on or before April 30th each year. You can extend the time of filing by submitting Form 200EX prior to the due date.
To learn more about the tax rates at the state and federal levels, don’t miss our article on Delaware Tax System.
What is the process of filing personal income tax in Delaware?
Step 1: Complete the federal income tax and other states’ taxes
In order to prepare to file your Delaware personal income tax, you have to finish your federal tax return as well as that of other states. This is a crucial step to prepare for filing your individual income tax in Delaware according to the determined tax rate.
Step 2: File the top boxes with the most essential information
File your names and address then mark the corresponding boxes.
You are eligible to file as a single taxpayer if on December 31st of the last year. In this case, please use Filing status 1.
Filing statuses 2 and 3 are for married taxpayers. You can file joint or separate returns. However, if only one of you works in Delaware or both your gross income in Delaware exceeds $9,400, you should opt for separate returns as it brings more benefits.
Lastly, if you pay taxes as the head of household, choose Filing status 5.
Step 3: Proceed to fill the back of the form
After finishing the front, turn the form over and start filing the back of it. Here is a quick instruction on how to file it:
- Column 1 – Your federal tax
From Line 1 to Line 17 of this Column 1 should match each line of your Federal Form 1040 and 1040 schedules (except for Filing status 3).
- Column 2 – Delaware Source Income and/or Loss
List out all streams of income, gain, loss, or adjustment that are generated inside of Delaware. To part-year residents, don’t forget to include all your income from any other sources besides Delaware.
Step 4 – Finish your filing with the attached documents
After filling in all the necessary information, don’t forget to attach the corresponding documents to your Delaware tax return. Please read the next part to get insights into what documents should be included.
Step 5 – Send your Delaware income tax return
The last step to finalizing your tax return is to sign and date your report. Then send it to the addresses below.
- Submitting with the payment or balance due: State of Delaware, Division of Revenue, P.O. Box 508, Wilmington, DE 19899-508
- Submitting with the refund due: State of Delaware, Division of Revenue, P.O. Box 8710, Wilmington, DE 19899-8710
- Submitting the tax return alone: State of Delaware, Division of Revenue, P.O. Box 8711, Wilmington, DE 19899-8711
Please keep in mind that your income tax return is not considered complete if it is not signed and dated. Plus, it is advisable to enclose your phone number on the tax return.
What documents to include with your Delaware income tax return?
The following documents are necessary to attach with your Delaware income tax return:
- DE Schedules I and III, if completed
- W-2 Form(s) issued by your employer and all 1099R Forms to receive credit for Delaware tax withheld
- A copy of your Federal 1040 Page 1 and 2 and all 1040 schedules (1, 2, 3, etc.)
- A copy of all federal schedules you are required to file with your federal return (for example, Schedule C, D, E, etc.)
- Delaware Schedule A (PIT-NSA), if itemizing deductions
- A signed copy of other states’ income tax return(s), if you claim credit for taxes paid to another state. Note: Don’t use the amount from your W-2 form(s)
- A copy of Form 1100S, Schedule A-1, if you take a credit for taxes paid by an S corporation
- A copy of Form DE2210, pages 1 and 2, if you completed Part 3 of the DE2210 or if the calculated estimated tax penalty is greater than zero
- A copy of Form 700, Delaware Income Tax Credit Schedule, Form 1801AC, and/or Form 2001AC, if applicable
- A copy of the Delaware Schedule W Apportionment Worksheet, if applicable. You must include pages 1 and 2
- A copy of Form 5403, Real Estate Tax Return, if individuals declared and paid estimated taxes on the sale of real estate owned in Delaware
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What is the possibility to extend the time of filing?
Though there is no way you a non-resident can extend the time of the payment of tax, the extension for the time of filing is possible.
You can extend the time of filing by filing the Application for Automatic Extension (Form 200EX) prior to the due date of your income tax return.
Should you have any questions regarding Delaware personal income tax matters, simply get in touch with one of our friendly consultants, who will be sure to offer the most practical advice and helpful guidance for your queries.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
FAQs
As mentioned, those having income from a Delaware source, including a resident, or a Delaware non-resident but received income from the state source, will be subject to personal income tax.
Who Must file a Delaware nonresident tax return? ›
Who Must File? 1. Non-Residents – File a tax return if you have any gross income during the tax year from sources in Delaware. If your spouse files a married filing separate return and you had no Delaware source income, you do NOT need to file a Delaware return.
What is the Delaware tax rate for 2022? ›
Delaware state income tax rate table for the 2022 - 2023 filing season has seven income tax brackets with DE tax rates of 0%, 2.2%, 3.9%, 4.8%, 5.2%, 5.55% and 6.6% for Single, Married Filing Jointly, Married Filing Separately, and Head of Household statuses.
Who is subject to Delaware income tax? ›
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.
Do I have to file a Delaware income tax return? ›
According to Delaware Instructions for Form 200-01, “If you are a Full-Year Resident of Delaware, you must file a tax return for 2021 if, based on your Age/Status, and if your individual adjusted Delaware gross income (AGI) exceeds the limit.
Do I have to file a Delaware state tax return? ›
Delaware has mandatory filing. All residents are expected to file a tax return, the filing deadline for 2021 is Monday April 18, 2022.
How much do you have to make in Delaware to file taxes? ›
Who has to file Delaware state taxes?
| Delaware age and income requirements to file taxes |
|---|
| Age | Single | Married, filing jointly |
| Under 60 | More than $9,400 | More than $15,450 |
| 60-64 | More than $12,200 | More than $17,950 |
| 65 and above, or blind | More than $14,700 | More than $20,450 |
2 more rows6 Jan 2022
In short, the answer is yes, Delaware is tax-friendly towards retirees. Like most states, Delaware offers a few different benefits for retirees who choose to spend their golden years there, but one benefit can be found in only four other states.
What age do you stop paying taxes on Social Security? ›
What Age Do You Stop Paying Taxes on Social Security? You can stop paying taxes on Social Security at 65 years old as long as your income is not high.
What is the Delaware individual tax rate? ›
Delaware has a graduated tax rate ranging from 2.2% to 5.55% on income under $60,000. The maximum income tax rate is 6.60% on income of $60,000 or over.
Delaware Tax Brackets for Tax Year 2020
- Tax Rate:0% :$0 to $2,000. Income Range:0% of Income.
- Tax Rate:2.2% :$2,000 to $5,000. Income Range:2.2% of Income.
- Tax Rate:3.9% :$5,000 to $10,000. ...
- Tax Rate:4.8% :$10,000 to $20,000. ...
- Tax Rate:5.2% :$20,000 to $25,000. ...
- Tax Rate:5.5% :$25,000 to $60,000. ...
- Tax Rate:6.6% :$60,000+
The state of Delaware collects income taxes based on seven tax brackets, with rates ranging from 0% to 6.6%.
...
Income Tax Brackets.
| All Filers |
|---|
| Delaware Taxable Income | Rate |
|---|
| $20,000 - $25,000 | 5.20% |
| $25,000 - $60,000 | 5.55% |
| $60,000+ | 6.60% |
4 more rows1 Jan 2021
The state has no value-added taxes (VATs), it does not tax business transactions, and it does not have use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.
Why is Delaware considered a tax haven? ›
What makes Delaware a tax haven? Companies and wealthy individuals can use Delaware to avoid paying some taxes in other states. So there's a thing called the Delaware Loophole, which essentially enables companies to avoid paying state corporate income tax where they earn the revenue.
At what age do you stop paying property taxes in Delaware? ›
be an owner or part owner of the property; 2. be at least 65 years old before the beginning of the tax year on July 1; 3.
Do I have to pay Delaware taxes if I work in Maryland? ›
If you live in Maryland and work in Delaware, you must file tax returns with both states. To avoid dual taxation, you can get a credit for taxes paid to Delaware by completing Maryland Form 502CR and filing it with your Maryland income tax return. Be sure to include a copy of your Delaware return.
How much can a 70 year old earn without paying taxes? ›
When seniors must file. For tax year 2021, unmarried seniors will typically need to file a return if: you are at least 65 years of age, and. your gross income is $14,250 or more.
Do I have to pay taxes on my 401k after age 65? ›
When you withdraw funds from your 401(k)—or "take distributions," in IRS lingo—you begin to enjoy the income from this retirement mainstay and face its tax consequences. For most people, and with most 401(k)s, distributions are taxed as ordinary income.
How long do you have to live in Delaware to be considered a resident? ›
In order to establish domicile in Delaware, a person must maintain a predominant physical presence in Delaware for a minimum of twelve consecutive months after moving to Delaware, the term “predominant physical presence” meaning presence for at least 183 days during the twelve-month period.
Do I pay taxes on 401k withdrawal after age 60? ›
You in effect become your own paymaster – meaning you can determine the amount of the distribution. If your 401 k contributions were traditional personal deferrals the answer is yes you will pay income tax on your withdrawals.
Delaware's Division of Revenue began processing 2021 individual income tax returns on January 31, 2022.
Who is exempt from paying income tax? ›
If you're over the age of 65, single and have a gross income of $14,250 or less, you don't have to pay taxes. Or if you're married and filing jointly, and you and your spouse are over 65, you can earn up to $27,800 before paying taxes [source: IRS].
Does Delaware have capital gains tax? ›
Capital gains tax
Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. In Delaware, the uppermost capital gains tax rate was 6.6 percent.
Which states do not tax retirement income? ›
States That Don't Tax Retirement Income
Those eight – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – don't tax wages, salaries, dividends, interest or any sort of income.
What taxes do seniors pay in Delaware? ›
Delaware is tax-friendly toward retirees. Social Security income is not taxed. Withdrawals from retirement accounts are partially taxed. Wages are taxed at normal rates, and your marginal state tax rate is 5.90%.
How much can a retired person earn without paying taxes in 2022? ›
In 2022, this limit on your earnings is $51,960.
We only count your earnings up to the month before you reach your full retirement age, not your earnings for the entire year.
Where is the best place to retire in Delaware? ›
The Top 9 Cities to Retire in Delaware
- Newark. Population: 31,155. ...
- Dover. Population: 38,992. ...
- Milford. Population: 12,272. ...
- Middletown. Population: 24,164. ...
- New Castle. Population: 5,499. ...
- Seaford. Population: 8,250. ...
- Georgetown. Population: 7,413. % of Population Above 65:2% ...
- Hockessin. Population: 13,478. % of Population Above 65:3%
You can receive as much as a $16,728 bonus or more every year. A particular formula will determine the money you'll receive in your retirement process. You must know the hacks for generating higher future payments.
Why is Social Security taxed twice? ›
“For decades, seniors have paid into Social Security with their tax dollars. Now, when many seniors are on a fixed income and struggling financially, they are being double-taxed because of income taxes on their Social Security benefits,” said Rep. Webster.
Does a 75 year old have to file taxes? ›
Do seniors have to file federal taxes? For tax year 2020, for which the deadline to file in 15 April 2021, many seniors over the age of 65 do not have to file a tax return. If Social Security is your sole source of income, then you don't need to file a tax return, says Turbo Tax.
Other benefits of Delaware living:
- Delaware Named Most Tax-Friendly State and Most Tax-Friendly State for Retirees by Kiplinger's Personal Finance Magazine.
- Social Security benefits are not taxed.
- No state or local sales tax.
- No inheritance tax.
- No personal property tax.
How to minimize taxes on your Social Security
- Move income-generating assets into an IRA. ...
- Reduce business income. ...
- Minimize withdrawals from your retirement plans. ...
- Donate your required minimum distribution. ...
- Make sure you're taking your maximum capital loss.
Contributing to a traditional 401(k) plan allows you to defer paying income tax on your retirement savings until the money is withdrawn from the account. Most workers are eligible to defer taxes on up to $20,500 in 2022 that is deposited in a 401(k), 403(b) or the federal government's Thrift Savings Plan.
What is Delaware source income? ›
The modified Delaware source income of a nonresident individual means that part of such individual's federal adjusted gross income and modifications provided for under § 1106 of this title derived from sources within this State determined under § 1124 of this title.
Do you pay taxes on Social Security in Delaware? ›
Delaware Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Is everything tax free in Delaware? ›
Delaware does not impose a state or local sales tax, but does impose a gross receipts tax on the seller of goods (tangible or otherwise) or provider of services in the state.
Do seniors pay property taxes in Delaware? ›
Homeowners age 65 or over are eligible for a tax credit against regular school property taxes of 50 percent (up to $500). This credit may only be used against property taxes on a primary residence. Have a Delaware Driver's License (60 days by law to change driver's license);
Can I buy a car in Delaware to avoid sales tax? ›
States that do not charge a sales tax include New Hampshire, Oregon, Delaware, Montana and Alaska. Where You Register the Vehicle: You can only avoid this tax if you purchase the car in a no sales tax state and then register the vehicle in that state as well.
How does Delaware make money with no sales tax? ›
Delaware
The state's 8.7% flat corporate income tax rate leads to tax collections that are the fourth highest in the country, and combined with a personal income tax, they help allow Delaware to charge no sales tax.
Why is Delaware the best state to form an LLC? ›
Delaware is often considered one of the best states to form an LLC because it has limited fees and tax obligations. In fact, many businesses choose to form an LLC in Delaware even if they don't intend on doing business in Delaware.
Personal property, tangible and intangible property is exempt. Real Estate is subject to county, school district, vocational school district and municipal taxes. The state offers various property tax relief programs for residents age 65 and older and for residents with disabilities.
How many years of residency must a homeowner 65 or older have to qualify for Delaware's state Senior property tax credit? ›
Important Changes to the Senior Property Tax Relief Program
Individuals who establish legal domicile in Delaware on or after January 1, 2018 will be required to have been legally domiciled within the State for a period of at least 10 consecutive years in order to be eligible to receive a credit.
What is a homestead exemption in Delaware? ›
Delaware's homestead law calls for an automatic exemption that protects equity in a home up to $125,000 (as of 2012). Also, for disabled persons unable to work or a married couple where one spouse is at least 65 years old, the homestead exemption is also $125,000. However, the property must be the principal residence.
What is not taxed in Delaware? ›
The state has no value-added taxes (VATs), it does not tax business transactions, and it does not have use, inventory or unitary tax. There is no inheritance tax in Delaware, and there are no capital shares or stock transfer taxes.
Is Delaware a tax friendly state for retirees? ›
In short, the answer is yes, Delaware is tax-friendly towards retirees. Like most states, Delaware offers a few different benefits for retirees who choose to spend their golden years there, but one benefit can be found in only four other states.
How is Delaware a tax haven? ›
Delaware is known as a “tax haven” to incorporate companies because of its light taxation. There is no sales tax in Delaware, it doesn't matter if a company's physical location is in the state or not; no in-state purchases are subject to tax in Delaware.
Do I have to pay Delaware taxes if I work in Maryland? ›
If you live in Maryland and work in Delaware, you must file tax returns with both states. To avoid dual taxation, you can get a credit for taxes paid to Delaware by completing Maryland Form 502CR and filing it with your Maryland income tax return. Be sure to include a copy of your Delaware return.
At what age do you stop paying property taxes in Delaware? ›
be an owner or part owner of the property; 2. be at least 65 years old before the beginning of the tax year on July 1; 3.
Do you pay taxes on Social Security in Delaware? ›
Delaware Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Is everything tax free in Delaware? ›
Delaware does not impose a state or local sales tax, but does impose a gross receipts tax on the seller of goods (tangible or otherwise) or provider of services in the state.
Delaware is tax-friendly toward retirees. Social Security income is not taxed. Withdrawals from retirement accounts are partially taxed. Wages are taxed at normal rates, and your marginal state tax rate is 5.90%.
What taxes do retirees pay in Delaware? ›
Social Security and Railroad Retirement benefits are not taxable in Delaware and should not be included in taxable income. Also, Delaware has a graduated tax rate ranging from 2.2% to 5.55% for income under $60,000, and 6.60% for income of $60,000 or over.
What is the Delaware tax Trap? ›
The term “Delaware Tax Trap” refers to a technique that causes inclusion of trust assets in the estate of a decedent under Section 2041(a)(3) of the Internal Revenue Code.
What are the tax benefits of Delaware? ›
Other benefits of Delaware living:
- Delaware Named Most Tax-Friendly State and Most Tax-Friendly State for Retirees by Kiplinger's Personal Finance Magazine.
- Social Security benefits are not taxed.
- No state or local sales tax.
- No inheritance tax.
- No personal property tax.
Delaware's low property tax offset by the state's high income tax rate. The state also has no retail sales tax, although businesses pay a gross receipts tax on sales.
What is taxed in Delaware? ›
Delaware has a graduated state individual income tax, with rates ranging from 2.20 percent to 6.60 percent. There is also a jurisdiction that collects local income taxes. Delaware has a 8.70 percent corporate income tax rate and also levies a gross receipts tax. Delaware does not have any state or local sales taxes.
How do I pay taxes if I work in one state and live in another? ›
If the state you work in does not have a reciprocal agreement with your home state, you'll have to file a resident tax return and a nonresident tax return. On your resident tax return (for your home state), you list all sources of income, including that which you earned out-of-state.
What states have tax reciprocity with Delaware? ›
Delaware does not have reciprocity with any state. Withholding is only required in the “duty assigned state”, e.g. your state. Delaware provides a credit against the state liability for taxes paid by its residents to other states.
Is Delaware a reciprocal state with MD? ›
Delaware has not entered into a reciprocal agreement with Maryland. You have a withholding requirement for the wages paid as compensation for services rendered in the Maryland office and those paid for services rendered while teleworking in Maryland.
