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Delaware State Taxes

Delaware-Income-Taxes

State Income Taxes in Delaware

The state of Delaware does have an 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 2020.

Additionally, the city of Wilmington, DE has an additional local income tax rate of 1.25% of income.

State Business Taxes in Delaware

The state of Delaware has a flat Corporate Tax rate of 8.7%. 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 total cost ranges from.095% to 1.99% of Gross Receipts.

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 .04% upto a maximum payment of $200,000. 

Sales and Property Taxes in Delaware

Sales Tax – Delaware is one of 5 states that does not have sales tax (the others being AlaskaMontanaNew Hampshire, and Oregon.)

Property Taxes in Delaware – the average property tax rate for residential property in the state of Delaware is 0.58%, 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 for 2020
  • UI Rates – range from 0.30% to 8.20%
  • Schedules – Delaware has only one schedule regarding UI rates

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