Whether you’re settled down along the Delaware River or living under the bright city lights of Wilmington, ringing in the new year always means tax season is in full bloom. Calculating your tax liability can be difficult, no matter how many times you’ve filed before. Even the most seasoned vets can make minor and costly mistakes with simple oversights or miscalculations. If you’re feeling uneasy about calculating your taxes, we’re here to ease the burden.

Before we dive into the details of Delaware’s state-level tax laws and regulations, let’s first clarify the difference between state and federal taxes, what state taxes mean for Delaware residents, and the tax rates you should expect come tax season.

If you’ve ever filed taxes before, you likely noticed that you had to file two separate tax returns: one for the federal government and one for your resident state. Though the vast majority of state-level tax returns request the same information as your federal return, it’s your legal responsibility to file both. But what is the exact difference between the two? Let’s break it down.

Federal taxes are government-mandated taxes levied and collected by the United States Internal Revenue Service (IRS) to support funding for a number of government expenditures. Every federal tax employs strictly set standardized rates and structures so the same requirements and restrictions apply to all taxpaying Americans.

State taxes, on the other hand, are levied and collected by each state’s independent government. This means that the enforced tax regulations will vary on a state to state basis—so residents in Delaware can expect a completely different set of tax obligations from a neighboring Pennsylvanian taxpayer. State tax systems can work on either flat or progressive income tax systems whereas federal taxes maintain a strong progressive income tax system.

Delaware’s state tax system uses a bracketed progressive income tax system that includes 7 different income thresholds. In essence, this means the higher your annual income, the higher rate you can expect to pay. Residents living in Wilmington are subject to the city’s own income tax flat rate of 1.25% in addition to the state-sanctioned bracket rates.

Delaware’s state income tax works on a progressive system, so the more you earn, the more you pay. There are seven different Delaware income tax brackets with rates ranging from 2.2% to 6.6%, as of 2019. Check out our tax rate bracket chart below to see where your annual income places you.

Delaware tax brackets are significantly different than the current federal tax brackets. Under Trump’s Tax Cuts and Jobs Act, federally sanctioned bracket rates range between 10% and 37%. Delaware’s tax rates range at a significantly lower rate, between 2.2% and 6.60%.

Because Delaware uses a 7-section tiered bracket system to impose income taxes, it’s important to understand where your income aligns and know what to expect when filing your tax return. The higher your annual income, the higher the rate at which your income will be taxed.

If you are self-employed, an independent contractor, or do not have Delaware income taxes withheld by an employer, you are still required to fulfill your taxpaying duties via quarterly estimated tax payments. Estimated taxes are designed to assess non-traditional worker’s income on a pay-as-you-go plan tax collection system.

You may be required to file Delaware estimated taxes if the following criteria applies to you:

• You are required to file a Delaware state tax return
• You do not have any taxes withheld by an employer
• You work in another state whose tax withholding rate is lower than Delaware’s
• You received unemployment compensation, a lump-sum distribution, or a large year-end bonus

In order to determine whether or not you will be required to make estimated income tax payments, the Division of Revenue has broken the calculation process into three steps:

Should you meet these criteria, you may be required to file Form 200-ESI, also known as the Internet Declaration of Estimated Income Tax form. If you’re unsure of whether you’re legally obligated to file estimated taxes, it may be in your interest to reach out to a tax professional who can better assess your tax-paying duties and liabilities.

Because Delaware estimated taxes function on a pay-as-you-go quarterly format, you will be required to make four scheduled payments throughout the year. You are required to file Form 200-ESI by the following dates:

• 1st quarter: April 30th
• 2nd quarter: June 17th
• 3rd quarter: September 16
• 4th quarter: January 15 (of the next calendar year)

Filing your estimated taxes is made easy by the State of Delaware’s electronic Form 200-ESI. You can make your quarterly payments via direct debit, credit card, or by mailed-in check.

Capital gains taxes are government-mandated fees levied on the profits made from selling certain types of assets, including everything from real estate property to stock investments. For the vast majority of the country, capital gains are subject to both state and federal taxation.

Capital gains in Delaware are assessed on the same bracketed scale and tax rate as all other personal income. This assessment applies to both long-term and short-term capital gains. However, there are special exceptions to this rule. Gains accrued from real estate sales in Delaware by taxpayers who reside in another state are taxed at a rate of 6.6% of profits earned.

46 of the 50 states house some form of sales tax that is controlled by the state government and put toward the development of government-funded programs—however, because sales tax exists on a state-level assessment, it is not required of all states to employ a sales tax. Delaware is one of the four lucky states that does not enforce a sales tax.

While the state of Delaware does not impose any sales tax, it does uphold a few strict excise taxes. Excise taxes are taxes that are charged to the producer or the vendor of a product, then typically passed onto the consumer at the direct point of sale. Excise taxes are imposed by both the federal and independent state governments and apply to a vast array of goods and services ranging from wine to gas.

Excise taxes are often referred to as indirect taxes because they’re not directly charged to the consumer, but they are reflected in the purchase price of the item. In essence, this means you will likely pay above retail value for a bottle of wine or a tank of gas in order for the vendor to cover the cost of the added excise fees.

Excise taxes that are put in place with the intention to deter consumers from engaging in activities that could be considered harmful to society are called “sin taxes”. Common examples of these “sin taxes” include alcohol, tobacco, gambling, and, marijuana. Let’s take a look at how these sin taxes may be affecting your wallet.

Delaware’s alcohol excises taxes are among some of the lowest in the country, so residents can indulge without breaking the bank. It’s important to note that just like other sin taxes that vary on a state to state basis, alcohol taxes tend to vary as well. Fortunately for Delawareans, the current system in place is easy to understand and easy on your pockets.

Delaware’s alcohol excise tax is broken into three different dominant categories:

• Delaware beer tax - $0.16 per gallon
• Delaware wine tax - $0.97 per gallon
• Delaware liquor tax - $3.75 per gallon

The current state-level tobacco excise tax in Delaware is higher than 58% of the other 50 states, ranking 21st highest in the country. Delaware tobacco consumers can expect to pay the following rates on cigarettes, cigars, and snuff.

• Delaware cigarette tax: $1.60 / 20 cigarettes + federal excise taxes
• Delaware cigar tax: $1.01 / 20 cigarettes + federal excise taxes
• Delaware tobacco and snuff tax: 15% wholesale price + federal excise taxes

Delaware’s fuel tax rate is $0.23 per gallon.

Owning a car is an expensive lifestyle, and filling up your tank every few weeks serves as a pricey reminder. The price you pay per gallon at the pump is a combination of the retail value and the incorporated federal and state gasoline excise taxes. Delawareans can expect to pay an extra $0.23 per gallon on gasoline.

Rejoice, Delawareans! Not only are the homes in Delaware beautiful, but the property taxes that come with them are among the lowest in the U.S. Unlike most states, the Delaware Division of Revenue does not assess property taxes on a state level—instead, property taxes are distributed and assessed on a county level.

All real estate in Delaware is subject to county property taxes, school district property taxes, and if applicable, municipal property taxes. The average tax rate of 0.56% measures far below the national average, earning Delaware its earnest rank as fifth lowest in the country. The average Delaware homeowner pays $1,329 annually in property taxes—nearly half of the national average property tax bill of $2,279.

Because there are so many different variables, calculating your exact liability can be a bit tricky. To get the most accurate assessment of your expected property taxes, contact your county’s property tax office.

• Sussex County Property Tax Division: (302) 855-7871
• New Castle County Department of Finance: (302) 323-2600
• Kent County Department of Finance: (302) 744-2386

Rejoice, Delawareans! Not only are the homes in Delaware beautiful, but the property taxes that come with them are among the lowest in the U.S. Unlike most states, the Delaware Division of Revenue does not assess property taxes on a state level—instead, property taxes are distributed and assessed on a county level.

All real estate in Delaware is subject to county property taxes, school district property taxes, and if applicable, municipal property taxes. The average tax rate of 0.56% measures far below the national average, earning Delaware its earnest rank as fifth lowest in the country. The average Delaware homeowner pays $1,329 annually in property taxes—nearly half of the national average property tax bill of $2,279.

Because there are so many different variables, calculating your exact liability can be a bit tricky. To get the most accurate assessment of your expected property taxes, contact your county’s property tax office.

• Sussex County Property Tax Division: (302) 855-7871
• New Castle County Department of Finance: (302) 323-2600
• Kent County Department of Finance: (302) 744-2386

The state of Delaware repealed the former state inheritance and estate tax systems as of 2018, meaning that inherited property and assets are not taxable in the First State. However, any property inherited from a death that occurred in 2017 or earlier may still be subject to the previous estate tax rate.

The former state inheritance tax claims that estates or assets valued at more than $5.49 million are subject to marginal rates ranging from 0.8% and 15%.

Though Delaware may be the second smallest state in the country, it is home to a lengthy list of available tax credits. Tax credits leveraged by both federal and state governments are employed as a way to assist taxpayers and reduce their annual tax liability. Let’s take a look at some of the more common credits that may apply to your return this year.

Historic Homes Rehabilitation Credit: The state of Delaware offers a credit to those assisting in preserving and rehabilitating historic buildings throughout the First State. Eligible applicants must work on properties that are either listed in the National Register of Historic Places or are certified as contributing to a listed historic district. The rehabilitation work in question must also meet the Secretary of the Interior’s Standards for Rehabilitation: a set of guidelines developed by the National Park Service.

Earned Income Tax Credit: Low-to-moderate income taxpayers who are eligible for the federal earned income tax credit (EITC) automatically qualify for the Delaware state-level EITC. Similar to the federal EITC, the value of the credit is completely dependent on the recipient’s income and number of dependents.

The Volunteer Firefighter’s Credit: The Volunteer Firefighters Credit offers a credit of $400 to Delaware residents who are active firefighters, or members of fire company auxiliaries or rescue squads. In order to qualify for the credit, you must be verified by the Delaware Division of Revenue with the in-state volunteer firefighter companies.

At Community Tax, we work hard to find every single available tax credit you may qualify on both federal and state-level fronts—giving you the highest return out of your annual state and federal tax filing.

Though state tax deductions are similar to tax credits, the two are very different when applied to your return. Tax credits reduce your tax liability dollar-for-dollar whereas tax deductions reduce your overall taxable income.

If you did not itemize your deductions on your federal tax return, you are eligible to claim the Delaware standard deduction. The standard deduction for joint filers is $6,500 and $3,250 for all other filing statuses. For senior citizens of 65 or older, an additional deduction of $2,500 may be claimed, as well.

If you do not intend to claim the Delaware standard deduction, you can claim itemized deductions instead. Carefully assess the benefits of each as you’ll want to choose the deduction structure that earns you the highest return and saves you the most money. For some taxpayers, claiming the standard deduction makes sense, and for others claiming itemized deductions is a more effective and lucrative avenue.

If you’re planning to itemize your Delaware state tax return deductions, you’ll use the same deductions claimed on your federal return. These include the following:

• Medical expenses
• Home mortgage interest
• Property, state, and local income taxes
• Investment interest expenses
• Charitable donations

No matter how many tax seasons you’ve survived, tackling it alone can be tricky. Fortunately, when you seek tax assistance from Community Tax, you gain access to our intelligent Delaware tax calculator that is designed to give you the numbers you need and the peace of mind you deserve this tax season. Step into tax season with confidence using this user-friendly calculator—all you’ll need to do is enter the following information:

• AGI
• Zip code
• Number of exemptions
• Number of dependents
• List of tax credits or deductions you qualify for

Gain the assurance you need by checking out our database collection of tax tips and tax preparation services to ensure the process is as smooth-sailing as possible.

According to the Comptroller of Delaware, you can pay your Delaware state taxes using the following methods:

• Personal check
• Credit card (MasterCard, Discover, Visa, or American Express)
• Direct debit

Using the Delaware Division of Revenue hub site, you can do everything from tracking the status of your tax return to accessing payment vouchers.

Let’s review: we’ve explored the many tricky details and conditions of Delaware state taxes, filtered through what deductions and credits are available to you, and glossed through how to pay Delaware state taxes—but what about your federal return?

As we’ve mentioned before, state and federal taxes are completely different return forms that function on completely different sets of regulations. This means you’ll have to file two separate tax returns to properly fulfill your federal tax responsibilities.

Confused about how to tackle your federal tax-paying duties? Check out our federal income tax hub page to learn the following:

• How to calculate your federal tax liability
• How to claim federal tax deductions and credits
• How to file and pay your federal taxes
• How to calculate your federal tax refund

This information is current as of 2019. Taxpayers should consider special circumstances that could impact their individual state tax return.