Guide to Delaware's Tax System

Taxes may not be the most exciting topic, but they’re an essential part of managing your finances and planning for the future. Whether you’re new to Delaware or a lifelong resident, understanding the state’s tax system can help you make smarter financial choices.

Delaware’s tax structure has unique benefits and considerations that make it stand out from other states, and navigating it effectively can lead to significant savings.

At B.I.G. Investment Services, we specialize in helping Delaware residents take control of their finances, including mastering tax planning. Our goal here is to make complicated topics, like taxes, simple and actionable, so you can focus on what truly matters.

Understanding Delaware’s Income Tax

Income tax is a major financial consideration for individuals and families in Delaware. The state uses a progressive income tax system, which means that the rate you pay increases as your taxable income rises.

Delaware Income Tax Rates

Delaware has six income tax brackets, with rates ranging from 2.2% to 6.6%. The 2.2% rate applies to the first $2,000 of taxable income for lower earners, while the top rate of 6.6% is applied to incomes over $60,000. And compared to many neighboring states, such as Maryland where top rates exceed 8%, Delaware's tax structure is relatively favorable.

Here’s a breakdown of the brackets:

• 2.2% on income up to $2,000

• 3.9% on income between $2,001 and $5,000

• 4.8% on income between $5,001 and $10,000

• 5.2% on income between $10,001 and $20,000

• 5.55% on income between $20,001 and $25,000

• 6.6% on income above $60,000

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What Sets Delaware Apart?

Unlike federal income tax brackets, Delaware’s income tax does not account for long-term gains versus ordinary income. This means careful tax planning is essential if you’re earning income from investments.

Tax Credits and Deductions

Delaware residents can take advantage of state-specific credits and standard deductions that soften the overall tax burden. Specific credits are also available for seniors, which we’ll discuss further in the retirement section.

Tax Filing Tip: Delaware residents must file state income taxes if they earn over $9,400 (for single filers) or over $15,450 (for joint filers). If you work in another state but live in Delaware, you may be eligible for a tax credit to avoid double taxation.

If you’re unsure how your income lines up with Delaware income tax rates, a consultation with B.I.G. Investment Services can clarify the numbers. We’ll help you file correctly while maximizing eligible deductions.

Guide to Delaware's Property Tax System

Compared to the national average, Delaware offers remarkably low property tax rates, making it an attractive option for homeowners and retirees alike.

Property Tax Rates in Delaware

One of the biggest advantages of living in Delaware is low property taxes. Delaware’s property tax rates are among the lowest in the U.S., averaging 0.56% of a home's assessed value.

Here are a few key points:

• Property taxes are assessed at the county level, meaning rates can vary depending on where you live.

• Homestead Exemption: Seniors (65+) who have lived in the state for at least 10 years can receive a credit of up to $500 on their school property taxes.

• Veterans & Disability Exemptions: Some exemptions are available for disabled veterans and low-income homeowners.
  

How Does This Benefit Homeowners?

Low property taxes reduce the overall cost of owning a home, particularly beneficial for retirees and families looking to stretch their budgets.

If you’re buying a home, our team at B.I.G. will help you understand your property tax obligations and apply for available credits to save as much as possible.

How Delaware Taxes Work for Every Resident: Other Taxes to Consider

Besides income and property taxes, Delaware residents should be aware of other taxes that may impact their financial planning:

No Sales Tax

That’s right—whether you’re buying groceries, upgrading your wardrobe, or even splurging on a new car, you won’t see any added tax at the register. In most other states, sales tax can range from 6% to 9%, which adds up fast. But in Delaware, your money stretches further. This tax-free shopping policy makes it an excellent state for residents and visitors alike.

Love good deals? Delaware’s got you covered.

Corporate Taxes: For the Business-Minded

While individuals get to enjoy Delaware’s tax-friendly perks, businesses do contribute through a corporate income tax, currently set at 8.7%.

But here’s the thing—Delaware is still known as a business haven for a reason. The state offers a business-friendly legal environment and has become a corporate hub, so it continues to attract companies big and small despite the tax rate.

No Estate or Inheritance Taxes

Here’s more good news, especially for retirees or those planning their financial legacies: Delaware does not impose an estate or inheritance tax. That means you can rest easy knowing your wealth can go where it belongs—directly to your loved ones—without the state taking a cut.

So if preserving your assets for future generations is a priority, Delaware is a fantastic choice.

Excise Taxes: A Few Exceptions

While Delaware’s lack of sales tax is a major win, there are a couple of exceptions to note. The state does charge excise taxes on specific goods like alcohol, tobacco, and gasoline. These flat taxes are applied when you make a purchase, but they’re relatively straightforward and won’t sneak up on you.

Delaware makes it easy to get the most out of your hard-earned dollars. It’s no wonder so many people and companies choose to put down roots here.

Delaware Tax System and Retirement Planning

If you're planning for retirement, Delaware is one of the most tax-friendly states you’ll find, making it a top choice for retirees like you.

Retirement Income Taxes: Keep More of What You Earn

Delaware has some fantastic policies for retirees. If you’re over 60, the state lets you exclude up to $12,500 of certain retirement income, like pensions, IRA distributions, or 401(k) withdrawals, from your taxable income.

And here’s the best part—Social Security benefits are completely tax-free at the state level. That’s money you can put toward travel, hobbies, or simply enjoying life without worrying about Uncle Sam taking a bigger slice of your hard-earned savings.

Property Tax Perks for Retirees

Delaware doesn’t just stop at income tax; it also offers property tax benefits to keep your housing costs manageable.

The Senior Citizen Property Tax Credit is a huge help for retirees looking to lower their expenses. This credit makes homeownership more affordable, meaning you can stay in the home you love or explore new options without breaking the bank.

Smart Investment Planning for a Tax-Friendly Future

Taxes don’t just affect your income—they also play a big role in your investments and savings strategy. Delaware’s tax system is designed to reward long-term planning, but it’s essential to ensure your approach is tailored to maximize those advantages. This is where a little guidance goes a long way.

Working with a financial expert, like the team at B.I.G. Investment Services, can help you navigate the tax landscape. We’ll help you align your retirement savings with Delaware’s rules, so you can minimize taxes and make the most of your nest egg.

Planning for retirement doesn’t have to be overwhelming, and you don’t have to figure it all out alone. Let us help you make the most of Delaware’s tax benefits so you can focus on what really matters—living the retirement you’ve always dreamed of.

FYI: Federal Tax Laws and Their Impact on Delaware Taxpayers

While Delaware’s tax system operates independently, changes at the federal level can still ripple through your finances.

What Delaware Taxpayers Should Know

• Changes to federal tax brackets or shifts in deductions and credits could affect how much you owe in state taxes. Even small tweaks at the federal level can make a big difference.

• If you’re a business owner, federal incentives like updates to depreciation rules could change how Delaware taxes apply to your income. These details can have a direct impact on your bottom line, so staying on top of them is crucial.
  

That's why at B.I.G., we’re here to help you stay ahead of the game. We keep a close eye on federal policy updates so you won’t be caught off guard when tax season rolls around.

Tax-Saving Strategies for Delaware Residents

Whether you’re saving for a long-term goal or working on your yearly tax returns, incorporating tax-saving strategies now can pay off later.

1. Make the Most of Your Retirement Contributions

Think of your retirement accounts as a double win: you're saving for the future and reducing your taxable income today. Contributing to tax-deferred accounts like IRAs and 401(k)s can make a big difference.

Not sure whether to go for traditional contributions or Roth accounts? It all depends on your long-term tax game plan. A little planning now can lead to bigger savings down the road.

2. Take Advantage of Valuable Tax Credits

Tax credits can be a game-changer, especially when it comes to reducing your tax bill. From credits for childcare expenses to incentives for upgrading your home with energy-efficient features, there are plenty of opportunities to save.

Don't leave money on the table—research which credits fit your lifestyle and start taking advantage of them.

3. Know Delaware’s Unique Tax Benefits

Delaware residents have access to some awesome tax perks that can ease the financial burden. If you're a veteran or a senior citizen, you could qualify for exemptions and credits designed to help you save even more.

Are you a homeowner? Be sure to claim every exemption available to lower your annual property taxes. These little-known benefits can add up to big savings.

4. Be Smart About Investment Income

Here’s the thing: Delaware taxes all income equally, including investment gains. That means you’ll want to approach your investments carefully to avoid paying unnecessary taxes. A strategic plan for managing your investment income can help you keep more of what you earn and keep your finances on track.

Let’s Create a Plan That Works for You

The best strategy for Delaware residents? Talk to the experts at B.I.G. Investment Services. Our team will work with you to create a personalized tax plan that fits your goals, lifestyle, and financial future.

Local Tools and Assistance: Resources for Understanding Delaware’s Tax System

Navigating Delaware’s tax system is easier when you know where to look for help.

✔️Division of Revenue Website: Delaware’s official site offers information, forms, and calculators to aid with tax filing.

✔️Taxpayer Advocate Service: If you’re having trouble resolving issues with the IRS or state tax office, this service is a valuable resource.

How B.I.G. Can Help

At B.I.G. Investment Services, we go beyond tax filing. We offer year-round support, ensuring your tax strategy fits seamlessly into your overall financial plan. Whether you need help with deductions, tax-advantaged accounts, or long-term planning, we’re here to assist.

Take Control of Your Taxes with B.I.G.

Understanding Delaware’s tax system is essential for making informed financial decisions.

Whether you're looking to optimize deductions, save for retirement, or simply navigate tax season efficiently, B.I.G. Investment Services is here to help. Our financial experts specialize in tax-efficient investment strategies and wealth planning tailored to Delaware residents.

Contact B.I.G. Investment Services today for a consultation and let us help you make the most of Delaware’s tax-friendly policies!