Taxes in Delaware: Features and Advantages

Main Taxes in the State of Delaware

Income Tax:

Delaware applies a progressive personal income tax scale with six brackets. As of 2025, rates range from 2.2% on income up to $2,000 to 6.6% on income over $60,000 (for filing status "single"). The tax applies to all major sources of income: wages, business income, rental income, investments, and capital gains. Delaware provides standard deductions, tax credits, personal allowances, and tax relief for retirees.

Sales Tax:

Delaware has no sales tax. This is one of the state’s main advantages, especially for retail, online businesses, and companies selling goods and services in other states. However, businesses may still need to comply with tax obligations in other states if they engage in interstate commerce.

Property Tax:

Delaware levies property tax only at the local level (city and county). The average effective rate is about 0.55%, making the property tax burden one of the lowest in the country. In addition, many retirees and disabled individuals may qualify for tax relief.

Business Taxes:

Delaware levies a Franchise Tax on most corporations registered in the state, even if they do not conduct business within Delaware. The Franchise Tax rate varies depending on the type of corporation and capital structure. The tax is calculated using two methods (Authorized Shares Method or Assumed Par Value Capital Method) and can range from $175 to $250,000 annually. In addition, C corporations pay Corporate Income Tax at 8.7% on taxable income derived from sources within Delaware (if the corporation has actual operations in the state: offices, employees, warehouses, etc.). For LLCs and LPs, a fixed Annual Franchise Tax of $300 applies. An Annual Report is mandatory for all corporations, including those not conducting business in Delaware. LLCs must pay the Franchise Tax but do not file an Annual Report. Our company provides full support for Delaware entities, including preparation of Annual Reports, calculation and timely payment of Franchise Tax, and structuring businesses for tax efficiency.

Excise Taxes:

The state levies excise taxes on fuel, alcohol, tobacco, and car rentals.

Favorable Tax Conditions in Delaware:

Delaware is known as the corporate hub of the U.S. and offers:
• Complete absence of sales tax,
• No inheritance or gift taxes,
• One of the simplest regimes for business administration,
• Strong legal protection for shareholders and directors,
• Attractive conditions for holding companies, startups, investment funds, and trusts.
Therefore, Delaware is often used as a jurisdiction for registering companies that operate in other states or internationally.

Taxes in Delaware Compared to Other States:

No sales tax, similar to Oregon, New Hampshire, and Montana.
Franchise Tax for corporations is among the highest, especially with large authorized capital. Annual Report is mandatory only for corporations, not LLCs.
No corporate income tax for corporations not conducting business in the state.
Stable legal system and developed infrastructure for corporate administration.