Payroll tax in Delaware: What employers need to know [2024]

Employers in the state of Delaware have many responsibilities, including calculating and paying taxes. Handling this obligation can be a challenge: In addition to federal income tax and FICA taxes—like Medicare tax and Social Security contributions—employers are also responsible for state payroll taxes. The fact that payroll tax rates vary from state to state adds to the complexity. The bottom line? It’s vital to understand the tax laws in the states where you hire to avoid penalties.

Delaware is one of many US states with a graduated tax rate, meaning employees' taxes go up as their pay increases. Similarly, if your company is experiencing growth and you’re adding new hires, the tax contributions you make as an employer will go up, as will the amount of taxes withheld from employees’ paychecks.

Whether you’re managing a small business or scaling a global company, if you have employees in Delaware, you need a thorough understanding of Delaware state taxes, who owes what, and the tax rates to remain compliant. In this guide, we’ll review all of that and more.

The 2 Delaware payroll taxes

The Delaware Division of Revenue and the Delaware Department of Labor are responsible for administering state-level payroll taxes. According to federal and state new hire reporting requirements, all employers must report new hires and re-hired employees to the Delaware State Directory of New Hire Reporting within 20 days of the employee’s start date. Additionally, you must send a W-2 form for each employee to the Division of Revenue.

There are two Delaware payroll taxes. Below, we’ll discuss each kind in more detail.

State unemployment insurance tax

Under the Federal Unemployment Tax Act (FUTA), Delaware employers must contribute to federal unemployment taxes. Additionally, the state of Delaware collects its own state unemployment insurance (SUI) to help pay for benefits for workers who lose their jobs due to no fault of their own. The Delaware Department of Labor’s Division of Unemployment Insurance is responsible for SUI tax and determining an employer’s tax rates.

In Delaware, the SUI tax rate for 2024—under the terms of a special Emergency Rule—ranges from 0.3% to 6.5%. The rate for new employers in the First State is 1.2%. For all other employers, the Delaware Department of Labor determines tax rates and sends out a notification each year. 

You must pay SUI taxes on the taxable wage limit, which is the first $10,500 an employee makes per year for 2024.

Delaware state income tax

In addition to federal income tax, Delaware residents are also responsible for paying a state income tax. The First State has a graduated income tax rate ranging from 2.2% to 6.6%. The amount each person pays is based on the amount they make, not their filing status. Employers must withhold the right amount from each employee’s paycheck. The Division of Revenue manages the reporting, collection, and enforcement of the state income tax; tax rates are based on employees’ W-2 forms.

Navigating payroll tax laws can be challenging, especially in Delaware. The state has a graduated income tax, local income taxes for the residents of Wilmington, and recently modified SUI tax rates. Rippling’s payroll compliance software makes it easy to file the right amount of taxes. Rippling automatically calculates your taxes, submitting tax forms and payments on your behalf—and tax laws are always monitored at the federal and state levels to ensure you’re compliant. Rippling PEO takes it a step further: It can register and maintain your state tax accounts for you, creating an even more automated payroll tax process.

Payroll tax due dates in Delaware

Delaware employers must submit payroll tax payments to the Delaware Division of Revenue by specific due dates. These dates vary depending on whether they file monthly, eighth-monthly, or quarterly payments. The state of Delaware encourages anyone filing electronically to submit their forms and payments a day early to allow enough time for processing; you must also use the correct tax code, 01106.

The deadlines for employers filing quarterly payments are below:

• First quarter (January-March): Due May 1
• Second quarter (April-June): Due July 31
• Third quarter (July-September): Due October 31
• Fourth quarter (October-December): Due January 31

If one of these dates falls on a weekend or a legally recognized holiday, you must submit your payments by the following business day. You can find the eighth-monthly, quarterly, and monthly payment deadlines for 2023 here.

How to submit payroll taxes in Delaware

We’ve now covered the types of payroll taxes you’re responsible for and their due dates. You’re probably wondering how you can complete your tax filing responsibilities. In Delaware, you have two options. 

Enroll in e-Services 

The Delaware Division of Revenue encourages businesses to pay their payroll taxes, local income taxes, and any other state taxes online using the Delaware Taxpayer Portal. You can either create a portal account or pay as a guest; instructions are available on the Division of Revenue’s website. 

Transfer funds electronically

Delaware employers can make tax payments via Electronic Funds Transfer (EFT). The Delaware Division of Revenue accepts payments made by either ACH debit or ACH credit. To make payments using this option, you’ll have to fill out the ACH for Gross Receipts Form or the ACH for Withholding/Corporate Tentative Tax Form and mail it to the address below:

The State of Delaware, Division of Revenue
ATTN: ELECTRONIC FUNDS COORDINATOR
P.O. Box 8750
Wilmington, DE 19899-8750

Instructions are available if you need help filling out the forms, along with more information about EFT, at revenue.delaware.gov.

Rippling’s full-service payroll software

Looking for a payment option that’s even easier? Rippling’s payroll software can automate the most time-consuming parts of the payroll process. Rippling automatically calculates and files your payroll taxes with the relevant agencies, like the IRS and the Delaware Division of Revenue—so you never have to worry about nailing your compliance work.

FAQs about Delaware payroll taxes

Are there local tax laws in Delaware?

Yes. In the state of Delaware, residents who live in cities with a population of over 50,000 people must remit 1.25% of their income to the municipality. Currently, the city of Wilmington is the only municipality in the state that’s permitted to levy an earned income tax. 

Can your tax returns be audited in Delaware?

Yes. The Delaware Division of Revenue has the right to audit state income tax returns to ensure residents pay the correct taxes.

Are nonprofit organizations subject to payroll taxes in Delaware?

The state of Delaware grants tax exemptions to certain nonprofit organizations. Under state law, a nonprofit registered under Section 501(c) with the IRS is exempt from paying Delaware state corporate income tax, obtaining a state business license, and paying gross receipts tax on most sales of goods and services. However, even nonprofits that have received a tax exemption must pay taxes on services like providing accommodations and leasing personal property.

Nonprofits that wish to operate in Delaware must register with the Division of Revenue and the Delaware Department of Labor and withhold state income tax for their employees.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.