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Delaware Taxes: What We Need to Know 

Understanding Delaware’s tax landscape is crucial for both employers and employees. From federal and state withholdings to insurance contributions, Delaware’s tax system impacts your paycheck in several ways. 

Here’s a breakdown of the key components: 

Federal, State, and Local Tax Withholdings 

The residents of the First State face a tiered tax system. While federal income tax applies nationwide, the state income tax ranges from 2.2% to 6.6%, depending on your earnings. Unlike some states, Delaware doesn’t impose a general sales tax.  

FICA and State Insurance Taxes 

The Federal Insurance Contributions Act (FICA) taxes fund Social Security and Medicare programs. These are split between employers and employees, each contributing 7.65% of wages (6.2% for Social Security and 1.45% for Medicare). Delaware also requires employers to pay State Unemployment Insurance (SUI) tax, which ranges from 0.1% to 5.4% for 2024. 

Pre-Tax Deductions 

Smart financial planning involves two components, the pre-tax era and the post-tax era. Pre-tax era includes deductions such as medical insurance premiums and 401(k) contributions, which helps reduce your taxable income. 

Here’s a quick reference table for Delaware’s key tax rates: 

Recent changes in Delaware’s tax laws have brought some relief to employers. House Bill 236, signed by Governor John Carney, extends the 2023 SUI tax relief into 2024. This means SUI rates will continue to range from 0.1% to 5.4%, potentially saving around $50 million. 

Additionally, starting in 2024, the 0.2% special assessment paid by all Delaware employers will be redirected to a Special Administrative Fund for the Department of Labor’s technology needs. This change will affect the federal form reporting. 

Whether you’re a long-time Delaware resident or considering a move to the state, knowing how these taxes affect your paycheck helps you make smarter financial decisions. 

In the next section, let’s explore the Median Household Income in Delaware, providing context for how these tax rates affect the average Delaware family. 

Median Household Income in Delaware 

Understanding Delaware’s median household income provides a crucial context for the state’s tax structure and overall economic health. Let’s examine how it has evolved with time. 

Here’s a table showing Delaware’s median household income over the past few decades, adjusted for inflation using the Consumer Price Index Research Series (CPI-U-RS): 

Despite some fluctuations, this data reveals an overall upward trend in Delaware’s median household income. This reflects the state’s evolving economy, 

It’s important to note that these figures are adjusted for inflation, giving us a more accurate picture of purchasing power over time. 

When we consider these income levels in relation to Delaware’s tax structure, we can see why the state maintains a graduated income tax system. This approach aims to balance the tax burden across different income levels, with higher earners paying a larger share while still incentivizing the economy. 

Let’s discuss the tax brackets of the state in the next section. 

Delaware Tax Brackets 2024 

Delaware’s tax system is designed to balance revenue generation with economic growth. The state employs a graduated income tax structure, ensuring tax burdens are distributed on income levels. Let’s examine the current tax brackets and rates for 2024. 

Delaware State Income Tax Brackets for 2024: 

While Delaware’s state-level taxes are straightforward, some localities impose additional taxes. For instance, Wilmington, the state’s largest city, levies a local income tax of 1.25% on wages earned within the city limits. 

Here’s a snapshot of Delaware’s property tax rates: 

These rates are the lowest in the nation, making Delaware a first choice for homeowners and real estate investors. 

Other notable taxes: 

• Corporate Income Tax: 8.7% 

• Gross Receipts Tax: Varies by business type 

• No State Sales Tax 

Delaware’s tax structure makes it the 21st best state in the 2024 State Business Tax Climate Index. 

As we consider these in relation to the median household income, it becomes clear why Delaware remains an attractive state for both residents and businesses. The graduated income tax system, combined with other tax policies, aims to create a balanced economic environment that supports both individual well-being and overall state economic growth.  

Wrapping It Up 

As we have navigated Delaware’s financial landscape, it’s clear that the First State offers a unique economic environment. The state’s tax policies, combined with its evolving economic landscape, create an environment that can be financially advantageous for many. 

Staying informed about the tax policies and how they interact with your personal or business finances is the key to making the most of what Delaware has to offer.