Delaware Income Tax for Business Owners: 2.2% to 6.6% Personal Brackets for 2026 and the 8.7% Corporate Rate

Delaware's tax structure for business owners is deceptively straightforward. The state has no sales tax. Instead, Delaware relies on personal income tax, corporate income tax, and a gross receipts tax on business revenue. If you are forming a business in Delaware or earning income within the state, you need to understand how these layers work together and which ones apply to your situation.

This guide covers the specific personal income tax brackets for 2026, the corporate income tax rate, how pass-through entity taxation works, and what nonresident business owners owe. Because taxation intersects with legal and financial planning, consult a qualified tax professional or attorney before making decisions based on this information alone. This content is informational, not legal or tax advice.

Delaware Personal Income Tax Brackets for 2026

Delaware's personal income tax uses a graduated bracket system that has remained unchanged since 2014. For 2026, residents are taxed as follows:

• 0% on the first $2,000 of taxable income
• 2.2% on income from $2,000 to $5,000
• 3.9% on income from $5,000 to $10,000
• 4.8% on income from $10,000 to $20,000
• 5.2% on income from $20,000 to $25,000
• 5.55% on income from $25,000 to $60,000
• 6.6% on income over $60,000

The key point: the second bracket rate of 2.2% is the rate most often cited when people discuss Delaware's "low" income tax, but this applies only to a narrow band of income. Taxable income above $60,000 is taxed at 6.6%.

Standard Deduction and Credits

Before calculating tax owed, you can reduce your taxable income by the standard deduction:

• $3,250 for single filers
• $6,500 for married filing jointly
• An additional $2,500 if age 65 or older

You can also claim a personal credit of $110 per exemption. The standard deduction reduces your taxable income, and the personal credit reduces the tax you owe.

Delaware Corporate Income Tax: 8.7% Flat Rate

If you form a traditional C corporation in Delaware, the corporation itself pays corporate income tax at a flat rate of 8.7% on federal taxable income that is allocated and apportioned to Delaware.

This means the corporation's federal taxable income (the amount reported on federal Form 1120) is subject to the 8.7% Delaware corporate rate. If your corporation does business only in Delaware, the full federal taxable income is apportioned to Delaware. If your business operates in multiple states, you will apportion income to Delaware based on receipts, payroll, property, or other factors depending on Delaware's apportionment formula.

Many business owners choose Delaware incorporation for reasons beyond tax (legal certainty, Court of Chancery, established corporate law). The 8.7% rate applies to income apportioned to Delaware, and a Delaware entity that does no business in Delaware owes the formation layer only.

Pass-Through Entity Taxation: LLCs, Partnerships, and S Corporations

If you form an LLC, partnership, or S corporation in Delaware, the entity itself does not pay Delaware income tax on business profits. Instead, the owners pay income tax on their share of the profits at individual rates. This is called pass-through entity taxation. However, Delaware does impose an annual tax on the entity itself, separate from income tax.

LLC Annual Tax

Every Delaware LLC owes a flat annual tax due on June 1 each year, regardless of profit or loss. Under legislation effective for the 2026 tax year (HB 400), this tax is $400 per year. The first $400 payment is due June 1, 2027. Do not confuse this with Delaware income tax. The LLC annual tax is a filing tax, similar to a franchise tax, and you owe it simply for maintaining the LLC's active status in Delaware.

If your LLC earns income in Delaware, the LLC itself does not owe Delaware income tax, but the owners do. If the LLC earns income and the owners are Delaware residents, they report their share on their Delaware resident individual income tax return. If the owners are nonresidents, they owe Delaware tax only on their share of Delaware-source income, prorated by Delaware source income over total income.

Partnerships and S Corporations

Delaware partnerships file Form 300 with the Division of Revenue. Delaware S corporations file Form 1100S. Like LLCs, these entities do not pay Delaware income tax on profits. Instead, income flows through to the owners' individual returns. Each owner reports their share of profit or loss and pays Delaware income tax at individual rates.

Pass-Through Entity Tax Elections

In recent years, some states have introduced optional pass-through entity tax elections that allow the entity (instead of the owners) to pay a state-level tax, creating a deduction for federal purposes. Delaware may offer such elections. For current details and whether such an election is available to your entity type, contact the Delaware Division of Revenue at https://revenue.delaware.gov/.

Gross Receipts Tax: Delaware's Answer to Sales Tax

Delaware has no state sales tax. Instead, businesses that hold a Delaware business license owe a gross receipts tax (GRT) on their business revenue. This is a tax on the seller, not the buyer. The rate depends on your license category:

• Services and wholesale: 0.3983%
• General retail: 0.7468%
• Restaurants and contractors: 0.6472%
• Food processors: 0.1991%
• Manufacturers: 0.126%

The gross receipts tax is filed separately from income tax, typically monthly or quarterly (new businesses file quarterly) and applies to gross revenue above a $100,000 monthly exclusion or $300,000 quarterly exclusion.

If you sell goods or services to customers in Delaware, you must obtain a Delaware business license from the Division of Revenue. The license is applied for through Delaware One Stop at https://onestop.delaware.gov. The annual fee is $75 for most business categories or $90 for general retail (which includes a $15 retail crime fee). You then owe gross receipts tax based on your category.

Nonresident Business Owner Taxation

If you are a nonresident (not a Delaware resident for tax purposes) and you operate a business in Delaware or earn Delaware-source income, you owe Delaware income tax on that income. The tax is prorated: it is the tax computed as if you were a resident, multiplied by the fraction of your income that is Delaware-source.

For example, if a nonresident business owner has $100,000 of income, of which $40,000 comes from a Delaware business, they work out the tax as if they were a resident and then multiply it by the Delaware-source fraction (40%). They do not automatically owe zero Delaware tax. Many business owners incorrectly assume that operating through a Delaware LLC eliminates nonresident tax liability. It does not. Nonresidents are taxed on Delaware-source income regardless of entity type.

If you are unsure whether income is Delaware-source, consult a Delaware tax professional or the Division of Revenue.

When Delaware Income Tax Applies (and When It Does Not)

Understanding when you owe Delaware income tax depends on several factors:

1. Resident of Delaware: All income, from all sources, is subject to Delaware income tax at the rates shown above.
2. Nonresident with Delaware business: Only Delaware-source income is subject to Delaware income tax, prorated by source.
3. Delaware entity with no Delaware business: The entity may owe annual entity taxes (LLC annual tax, corporation annual report fee, etc.) but does not owe Delaware income tax. The owners may owe income tax in their home states.
4. Nonresident employee working in Delaware: Wages for work performed in Delaware are Delaware-source income. Check with the Division of Revenue for how your situation is treated.

The LLC annual tax of $400 applies regardless of whether the LLC does Delaware business. If the LLC earns income only outside Delaware, the owners do not owe Delaware income tax on that income, but the LLC still owes the $400 annual tax due June 1.

Key Dates and Deadlines

For business owners, keep these Delaware tax deadlines in mind:

• LLC Annual Tax: Due June 1 each year (for the prior calendar year); amount is $400 for LLCs, LPs, and general partnerships under HB 400 (2026 tax year and beyond). Confirm the current amount and deadline at https://corp.delaware.gov/.
• Corporation Annual Report and Franchise Tax: Due on or before March 1 each year; includes a $50 filing fee.
• Gross Receipts Tax: Filed monthly or quarterly; new businesses file quarterly. Check the Division of Revenue for your filing period and deadline.
• Resident Individual Income Tax: Returns are due on or before April 30 (30 Del. C. 1168). Consult the Division of Revenue or a tax professional for your specific filing requirement.

Compliance and Professional Guidance

Delaware income tax and entity-level tax compliance is a technical area. If you are unsure whether you owe Delaware income tax, how to file, or how your entity type affects your tax obligation, consult a qualified Delaware tax professional or a CPA licensed in Delaware. The Delaware Division of Revenue provides general information at https://revenue.delaware.gov/, and many questions can be answered by contacting the division directly.

Business formation is likewise a specialized area. If you are forming a Delaware LLC, corporation, or other entity specifically for tax treatment, an attorney licensed in Delaware can advise whether the structure achieves your goals and what ongoing obligations you will face.

Summary

Delaware has no sales tax, and its corporate income tax is 8.7% of income apportioned to Delaware. However, business owners must understand the full picture: residents pay individual income tax at rates from 2.2% to 6.6%, nonresidents pay on Delaware-source income only, and entities owe separate annual taxes independent of income tax liability. Pass-through entity taxation offers flexibility but requires careful tracking of entity-level and owner-level obligations.

Before making decisions based solely on Delaware's tax code, work with professionals who understand Delaware's tax law, your home state's tax obligations, and your business structure. The details make the difference between a smart tax strategy and an expensive mistake.

Official Resources

• Delaware Division of Revenue: https://revenue.delaware.gov/
• Delaware One Stop (Business License and GRT): https://onestop.delaware.gov
• Delaware Division of Corporations: https://corp.delaware.gov/
• Delaware SBDC (Small Business Development Center): https://delawaresbdc.org/

Disclaimer: This content is informational only and does not constitute legal, tax, or accounting advice. Tax laws are complex and change frequently. Before making any business or tax decisions, consult a qualified attorney, CPA, or tax professional licensed in Delaware who can assess your specific situation.