Delaware has a graduated income tax up to 6.6% on income above $60,000. Delaware has no state sales tax — a genuine consumer benefit. Delaware provides a pension/retirement income exclusion of up to $12,500 for residents age 60+, making it moderately retirement-friendly. Property taxes are low (~0.57% effective rate). Delaware has no inheritance tax. Delaware's status as a corporate tax haven (no sales tax on goods purchased in Delaware, favorable corporate law) benefits businesses but does not reduce individual income tax burden. For high earners, moving to Florida eliminates the 6.6% income tax while maintaining no estate or inheritance tax.
At a glance
Key Facts
Delaware Income Tax Brackets (2024)
0% (up to $2,000); 2.2% ($2,001–$5,000); 3.9% ($5,001–$10,000); 4.8% ($10,001–$20,000); 5.2% ($20,001–$25,000); 5.55% ($25,001–$60,000); 6.6% (above $60,000). Delaware's top rate of 6.6% is relatively modest by Northeast standards (NJ: 10.75%, NY: 10.9%, MD: 5.75% + local up to 3.2%) but exceeds Pennsylvania's 3.07% flat rate.
No State Sales Tax
Delaware has no state sales tax — one of only 5 states with no state sales tax. This is a meaningful consumer benefit: a Delaware resident making major purchases (electronics, furniture, appliances, vehicles) saves 6–10% compared to purchasing in neighboring Maryland, New Jersey, or Pennsylvania.
Retirement Income Exclusion
Delaware provides a retirement income exclusion of up to $12,500 for residents age 60+. This exclusion applies to pensions (private and government), IRA/401k distributions, and qualifying investment income. For residents below age 60, a $2,000 pension exclusion applies. Social Security is not taxable in Delaware. This makes Delaware moderately retirement-friendly — not as favorable as Pennsylvania (which exempts all pension income) but better than most states.
Property Tax
Delaware property tax effective rate approximately 0.57% — one of the lower rates in the Northeast. A $400,000 home in Delaware averages approximately $2,280/year in property tax. New Castle County (Wilmington area) has slightly higher rates; Sussex County (beach area) is lower. Delaware provides a Senior School Property Tax Credit (up to $400/year) for residents age 65+.
No Inheritance Tax
Delaware repealed its inheritance tax in 2009. Delaware has no estate tax. Delawareans pay only federal estate tax (exemption: USD 13.61 million in 2024).
No County or Local Income Tax
Unlike Maryland (which levies county income taxes of 2.25–3.2% on top of state income tax) or New York City (3.876% city income tax), Delaware has no local or county income tax. The stated 6.6% top rate is the total Delaware income tax burden.
Introduction
Delaware is a small state with a tax profile that divides into two distinct stories: for corporations and businesses, Delaware is one of the most favorable jurisdictions in the world — over 60% of Fortune 500 companies are incorporated in Delaware for its flexible corporate law and Court of Chancery. For individuals, Delaware's tax picture is more mixed. The income tax tops out at 6.6% (below New Jersey's 10.75% and Maryland's 5.75% + local, but above Pennsylvania's 3.07% flat rate). The no-sales-tax advantage is real for consumers: Delaware is one of only five states with no state sales tax, and the Rehoboth Beach area has become a shopping destination for neighboring Maryland and New Jersey residents. This guide covers what individual Delaware residents considering a move need to know.
Section 01
Delaware vs Pennsylvania and Maryland: The Key Comparisons
Delaware's primary comparison states are its neighbors — Pennsylvania, Maryland, and New Jersey.
Delaware vs Pennsylvania
Pennsylvania has a flat 3.07% income tax rate on all income — significantly lower than Delaware's 6.6% top rate. For a Wilmington, Delaware resident earning $100,000: Delaware income tax approximately $5,900–$6,300. Pennsylvania income tax: $3,070. However, Pennsylvania does not tax Social Security, pension income, or IRA/401k distributions for retirees at all — more generous than Delaware's $12,500 exclusion. For pre-retirees with high W-2 income, Pennsylvania is cheaper; for retirees, Pennsylvania's full pension exemption is superior to Delaware's $12,500 cap. Delaware wins on no sales tax (PA has 6% sales tax).
Delaware vs Maryland
Maryland state income tax: 2–5.75% + county income tax of 2.25–3.2% = effective combined rate 4.75–8.95%. Delaware at 6.6% is lower for most income levels when Maryland county tax is included. Maryland also has a 6% sales tax. Delaware wins on both income tax and no sales tax. Many Maryland residents shop in Delaware (particularly Rehoboth Beach/Lewes area) to avoid Maryland's sales tax.
Delaware vs Florida
Florida has zero income tax, zero estate tax, and zero inheritance tax — clearly superior for income tax purposes. Delaware's no-sales-tax advantage does not exist in Florida (no sales tax on some categories but 6% general rate). For a Delaware retiree with $80,000 retirement income: Delaware income tax approximately $4,200–$4,600 (after $12,500 exclusion) vs Florida income tax of $0. Annual savings in Florida: approximately $4,200–$4,600.
Section 02
Delaware Residency Exit Rules
Delaware uses standard domicile-based residency:
Delaware Residency
Delaware defines a resident as someone domiciled in Delaware, or a non-domiciliary who maintains a permanent place of abode in Delaware and is present more than 183 days. To exit Delaware residency: establish domicile in the new state (driver's license, voter registration, primary home), change vehicle registration. Delaware does not have an aggressive post-departure audit reputation relative to states like California or New York.
Part-Year Returns
In your departure year, file Delaware Form 200-02 (non-resident/part-year return) covering income earned during Delaware residency. Delaware-source income after departure (Delaware rental property, Delaware business income) remains taxable to non-residents. Delaware's Gross Receipts Tax (a business revenue tax) applies to Delaware-registered businesses regardless of owner residency.
Delaware domicile changes, remote worker income sourcing questions, retirement income planning, and part-year returns require CPA guidance. TaxHub connects you with state tax specialists.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Delawareans moving abroad face state residency termination and US expat filing requirements. Greenback specialises in US expat state tax exit planning.
⚠ Not the cheapest option — best for complex situations and expats who want a dedicated CPA.
No — Delaware does not tax Social Security income at any income level. This is an advantage over states like Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont, which tax Social Security above certain thresholds. Combined with Delaware's $12,500 retirement income exclusion for residents age 60+, Delaware is reasonably favorable for retirees on Social Security plus a modest pension or IRA. A Delaware retiree with $20,000 Social Security + $20,000 pension (age 60+): the Social Security is fully exempt; the pension is covered by the $12,500 exclusion; only $7,500 of pension income is taxable at Delaware's lower brackets. Estimated Delaware income tax: approximately $300–$400.
Q
Is Delaware's 'no sales tax' advantage worth staying for?
The no-sales-tax advantage is real but typically not a primary financial driver for residency decisions. Delaware saves a resident approximately 6–8% on purchases subject to sales tax in neighboring states. For a household making $30,000 in taxable purchases per year (a rough estimate for middle-class spending), the sales tax savings are approximately $1,800–$2,400/year vs Maryland or New Jersey. This is meaningful but smaller than income tax differentials for moderate-to-high earners. For retirees on fixed incomes who make significant purchases (vehicles, appliances), the no-sales-tax benefit can be material. For high earners focused on income tax optimization, the 6.6% Delaware income tax rate creates a larger financial consideration than the sales tax savings.
Q
How does Delaware treat remote workers who move out of state?
Delaware has a specific rule affecting remote workers: Delaware taxes income for work performed in Delaware or for Delaware employers. If a Delaware employee works remotely for a Delaware employer from a different state, Delaware has historically taken the position that the income is Delaware-source and taxable in Delaware — the 'convenience of the employer' rule, similar to New York's approach. This means a former Delaware resident who moves to Pennsylvania but continues working remotely for a Delaware employer may still owe Delaware income tax on that income. Pennsylvania provides a credit for taxes paid to Delaware in these situations, but the interaction creates complexity. If you are leaving Delaware but working for a Delaware employer, discuss the tax implications with a CPA before departing — you may owe Delaware income tax on your employment income even as a Pennsylvania resident.
Disclaimer:This guide provides general tax information for educational purposes only. Delaware income tax brackets and retirement income exclusions are subject to legislative change. This is not tax advice. Consult a CPA for Delaware-specific tax planning.