What are the Income Tax Laws in Delaware?
Income tax is one of the most disliked responsibilities in an adult’s life. While nobody is fond of the fact that a part of their income is deducted as tax, it is a relief to know that this money is used for good causes. Your income tax is channeled into revenue for local and state governments, public resources, and certain special programs.
In most states in the USA, businesses are expected to pay corporate income tax. Personal income tax slabs include limited liability companies (LLCs), S corporations, sole proprietorships, and partnerships. Different states have different laws for corporate and personal income tax. This article deals with the income tax laws and requirements in the state of Delaware.
Income tax laws in Delaware
Most of the tax revenue generated in Delaware comes from personal income tax and excise or special sales taxes. Depending on your business’ legal form, you are subjected to pay corporate income tax or franchise tax. This is enforced on S corporations and C corporations. If your income comes directly from your business, you will have to pay personal income tax.
Personal income tax rates
Delaware uses a personal income tax rate that ranges from 0% to 6.6%. The amount of tax an individual is liable to pay depends on their income range and corresponding tax bracket. Personal exemptions are allowed only in special cases where the individual’s income is below the taxable income range.
Excise taxes in Delaware
Excises taxes are also known as differential commodity taxes or selective sales taxes. They are levied on specific services or sales of certain goods. Sellers or producers of these specific goods are subjected to pay excise taxes. Consumers are also subjected to payment as the tax cost is included in the item’s sales price.
Capital gains tax in Delaware
This tax is levied on the profits earned from selling a capital asset such as businesses, stocks, houses, land parcels, personal items, etc. Capital gains are subjected to tax at both state and federal levels. The uppermost rate of capital gains tax in Delaware is 6.6%.
Sales tax in Delaware
Most states in the US levy sales tax, but Delaware is one of the few states that do not have any sales tax.
Corporate income tax in Delaware
The corporate income tax rate in Delaware is 8.7%. This rate is levied on every foreign and domestic corporation that has set up business in the state. The factors included in Delaware’s corporate income tax are wages, sales, and property. S corporations that make revenue within the state are required to pay corporate income tax by filing a Form the 1100S, S-Corporation Reconciliation and Shareholders Information Return. Certain non-profit organizations recognized by the IRS are exempted from paying corporate income tax, but they are required to submit an annual report.
Property tax in Delaware
Delaware, like most other states in the US, levies property tax on real estate and certain personal items. An individual’s property tax liability depends on the tax base and rate of the items they own. This is calculated using the property’s assessed value and the taxable share of that value.
Estate and inheritance taxes
These taxes are levied on property that belonged to deceased individuals. The estate tax is subjected to the value of the deceased person’s property which is paid before it is distributed to rightful heirs. On the other hand, an inheritance tax is paid by the heir after they receive the deceased individual’s assets. In addition to levying inheritance and estate taxes, residents of Delaware are also subjected to federal estate tax.
Becoming familiar with the income tax laws in Delaware will greatly help you while filing for returns. Tax rates are subject to change, so make sure you are abreast with the latest tax news.