Delaware Income Tax Guide 2026: No Sales Tax, Low Property Tax & Retirement Rules

Delaware’s signature tax advantage is simple: no sales tax. Delaware is one of just five states without a state or local sales tax, eliminating a cost that runs 6%–10% in neighboring states. Delaware also has very low property taxes. The tradeoff is a progressive income tax that reaches 6.6% on income over $60,000 — though strong retirement income exclusions for those 60+ and a full Social Security exemption substantially reduce the burden for retirees.

Note: The bracket, deduction, and exclusion figures below reflect the last confirmed structure. Confirm exact current-year figures at revenue.delaware.gov before relying on them for filing, as they were not independently re-verified against a live Delaware Division of Revenue source this session (the site blocked automated verification).

Delaware Income Tax Brackets 2026

These rates apply to both single and married filers against their respective taxable income after deductions. Delaware has historically not restructured its brackets as frequently as many states currently cutting rates — confirm there have been no recent changes.

Delaware Standard Deduction

Delaware’s standard deduction is lower than the federal standard deduction. However, Delaware taxpayers can choose to itemize Delaware deductions separately from their federal return — some Delaware deductions differ from federal.

Delaware Personal Exemption

Delaware’s personal exemption is nominal — the standard deduction provides the primary reduction in taxable income.

Delaware Tax Calculation Example

Married couple earning $95,000 (illustrative, using the bracket structure above):

1. Gross income: $95,000
2. Standard deduction: −$6,500
3. Exemptions (2 × $110): −$220
4. Taxable income: $88,280
5. Tax calculation:
   • $2,000 × 0% = $0
   • $3,000 × 2.2% = $66
   • $5,000 × 3.9% = $195
   • $10,000 × 4.8% = $480
   • $5,000 × 5.2% = $260
   • $35,000 × 5.55% = $1,943
   • $28,280 × 6.6% = $1,866
6. Total Delaware tax: ~$4,810
7. Effective rate on gross income: 5.1%

Social Security: Fully Exempt

Delaware does not tax Social Security benefits. All Social Security retirement, disability (SSDI), and survivor income is excluded from Delaware gross income. This applies at all income levels — there are no income thresholds or phase-outs.

Retirement Income Exclusion (Age 60+)

Delaware offers a meaningful exclusion for retirement income beyond Social Security:

The exclusion applies to:

• Pension income (public and private)
• 401(k) and 403(b) distributions
• Traditional IRA withdrawals
• Annuity payments
• Other eligible retirement income

Military retirement pay is fully exempt at any age — not capped like the general exclusion.

Retiree Tax Impact Example (Illustrative)

A 65-year-old Delaware resident with the following income:

• Social Security: $24,000 → Exempt
• IRA distribution: $30,000 → $12,500 exempt, $17,500 taxable
• Pension: $20,000 → Covered by $12,500 exclusion (already used) → $20,000 taxable

Taxable income: $17,500 + $20,000 = $37,500 − $6,500 (standard deduction) − $220 (exemptions) = $30,780

Delaware tax on $30,780 (married): approximately $1,526 Effective rate on $74,000 total income: 2.1%

This illustrates how Delaware’s exemptions can substantially reduce the effective tax rate for retirees relative to the headline 6.6% top rate.

No Sales Tax: Delaware’s Signature Advantage

Delaware is one of only five states with no state sales tax (along with Alaska, Montana, New Hampshire, and Oregon). This has tangible benefits:

Delaware routinely draws shoppers from Maryland, Pennsylvania, and New Jersey — all of which have sales taxes of 6%–7%. The tax-free shopping advantage is most pronounced for large purchases: cars, appliances, and furniture.

Note: Delaware does levy a gross receipts tax on businesses — this is effectively passed to consumers through pricing, though it is not a visible line item on purchases.

Delaware Property Tax

Confirm the current average effective property tax rate and typical dollar amounts at revenue.delaware.gov or the Tax Foundation, as these figures were not independently re-verified this session. Property taxes in Delaware are assessed at the county level, and have historically been among the lowest in the Northeast:

Sussex County — home to Rehoboth Beach, Lewes, and Bethany Beach — has historically had the lowest property taxes and is a popular destination for retirees relocating to Delaware.

Senior Property Tax Exemption

Delaware provides a property tax exemption for homeowners age 65 or older who meet income requirements. The exemption varies by county and reduces the assessed value used to calculate taxes. Confirm current details with your county.

Delaware vs. Northeast Neighbors

Delaware’s income tax top rate looks high compared to Pennsylvania’s 3.07% flat rate. However, Pennsylvania has a 6% sales tax and generally higher property taxes in the Philadelphia suburbs. For retirees with significant property holdings and low earned income, Delaware can be meaningfully cheaper overall.

Capital Gains

Delaware taxes capital gains as ordinary income at the regular bracket rates. There is no preferential rate for long-term capital gains.

Wilmington City Wage Tax

Residents of the City of Wilmington pay an additional local wage tax on top of Delaware state income tax. Non-residents who work in Wilmington also pay a non-resident wage tax on income earned within the city — confirm the current rate, as this is the only significant local income tax in Delaware; other cities and towns do not levy one.

For those considering Delaware, living outside Wilmington city limits avoids the additional wage tax while still being close to the city’s employment base.

Delaware Estate and Inheritance Tax

Delaware repealed its estate tax effective January 1, 2018. There is no Delaware estate tax or inheritance tax — all assets pass to heirs free of state estate/inheritance taxes, regardless of the size of the estate.

Filing Requirements

Filing deadline: Confirm the current Delaware individual filing deadline with the Division of Revenue — it has historically differed slightly from the federal April 15 deadline. Extensions are available.

Electronic filing is available through the Delaware Division of Revenue.

Who Should Consider Delaware?

Strong fit for:

• Retirees 60+ who can leverage the retirement income exclusion, Social Security exemption, and low property taxes
• Military retirees — full military pension exemption
• Those making large purchases regularly — no sales tax provides ongoing savings
• Homebuyers in lower-property-tax counties like Sussex — beach proximity plus lower rates
• High-net-worth individuals with large estates — no estate or inheritance tax

Consider before moving:

• Top income tax rate of 6.6% is high compared to flat-tax or low-rate states
• Wilmington city residents pay an additional local wage tax
• Delaware is a small state with limited major metro job opportunities
• Humid Mid-Atlantic climate; not ideal if seeking dry or warm weather retirement

For a side-by-side comparison of every state’s income tax rates, see state income tax rates by state 2026 and best and worst states for taxes 2026. Federal income tax applies on top of state taxes — see 2026 federal income tax brackets to calculate your combined liability.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.