State Income Taxes in Delaware
The state of Delaware has individual income tax. Like most states with income tax, it is calculated on a marginal scale whose range is from 2.2% to 6.6% for 2021. They are broken down as follows:
- 2.20% > $2,000
- 3.90% > $5,000
- 4.80% > $10,000
- 5.20% > $20,000
- 5.55% > $25,000
- 6.60% > $60,000
Additionally, the City of Wilmington has an additional tax called the Wilmington Earned Income Tax (or City Wage Tax.) It’s a Gross Wages tax of 1.25% on wages and salaries.
State Business Tax & Gross Receipts Tax in Delaware
The state of Delaware has a flat Corporate Tax rate of 8.7% on all income. In addition to the Corporate Tax, the state of Delaware also imposes a Gross Receipts tax called Manufacturers’ and Merchants’ License Tax. This tax is broken down into two parts – a fee and a tax.
The average annual fee is $75 per location (even though some are as high ass $200 per year). The tax rates are between 0.0945% to 0.7468% depending on your business. Certain industries have an exclusion (for instance if you’re an Advertising Agency, your first $100,000 is excluded from tax). Payments are due monthly or quarterly, depending on your industry.
Court of Chancery – why businesses thrive in Delaware
Delaware is one of the strongest states in the union to open a Corporation. This is due many factors, most predominantly because it has a Court of Chancery. This allows business disputes to be based on case law and not a jury. The Chancery Court in Delaware spells out what business can and can’t do, regarding modern business laws. Many high profile companies have had their cases heard in the Court of Chancery (e.g. Disney, Microsoft, Yahoo, etc.)
Delaware Business Entities and Franchise Tax
This brings us to the Franchise Tax. Since Delaware is so preferable for Corporate entities, the state has decided to impose an annual business license fee (called the Franchise Tax) that is based on the authorized shares of the Corporate entity. Here are some important factors –
- When you register with the state, you pay a one time fee of $90
- If your entity is an LLC (i.e. no authorized shares) you pay $300
- If your entity is a Corporation, you pay between $175 – $200,000 based on the number of shares.
- Secretary of State of Delaware website – click here
Capital stock taxes in Delaware
Delaware is one of a few states that has a Capital Stock Tax. The tax rate is .035% up to a maximum of $200,000 in tax.
Sales and Property Taxes in Delaware
Property Taxes in Delaware – the average property tax rate for residential property in the state of Delaware is 0.59%, making it a very preferable place to own property.
Payroll Taxes in Delaware
Unemployment taxes usually consist of three factors. They are the wage base, range of rates, number of schedules. Below is an outline of the three:
- Wage Base – Delaware has a wage base of $16,500
- UI Rates – range from 0.30% to 8.20%
- Schedules – Delaware has only one schedule regarding UI rates