Comprehensive Guide to Payroll Taxes in Delaware

Navigating payroll taxes in Delaware involves understanding both federal and state tax obligations. This guide provides employers in Delaware with a structured and detailed overview of the payroll tax requirements, deadlines, and methods of payment in the state to ensure compliant payroll withholding.

General Overview

Employers in Delaware are responsible for handling federal income tax, FICA taxes (Medicare and Social Security), state payroll taxes, and local payroll taxes. Delaware also employs a graduated tax rate system, meaning that the tax rate increases with the level of income.

Employers must report new hires and re-hires to the Delaware State Directory of New Hire Reporting within 20 days. Additionally, employers are required to send a W-2 form for each employee to the Division of Revenue.

Certain nonprofits are exempt from state corporate income tax, state business license requirements, and gross receipts tax. However, nonprofits must still register with the Division of Revenue and the Delaware Department of Labor, and withhold state income tax for employees.

Cities in Delaware with over 50,000 residents may choose to enforce local taxes of up to 1.25%. Currently, Wilmington is the only city in Delaware with this tax.

Unemployment Insurance Tax (UI)

As an employer in Delaware, you are required to contribute UI tax, also known as state unemployment insurance (SUI), on behalf of your employees. UI provides temporary financial support for eligible workers who lose their jobs through no fault of their own.

The requirements of this federal program vary between states, and it is managed by the Delaware Department of Labor's Division of Unemployment Insurance in Delaware.

Delaware calculates your UI tax rate based on your experience rating and the amount in the trust fund balance. In 2025, the rates range from 0.4% to 5.4% with new employers starting at 1%. The taxable wage base is $12,500 per employee.

Delaware State Income Tax

Delaware residents are required to pay state income tax in addition to federal income tax. This tax is managed by the Delaware Division of Revenue. Employers must withhold state income tax from employees' paychecks based on the withholding tables published on their website and remit this to the state.

In Delaware, employees pay 0% to 6.6% of their gross wages in state income tax. The rate that an employer must withhold from each employee varies depending on their income, with those who earn more contributing a higher percentage.

The Delaware Division of Revenue can audit state income tax returns to ensure compliance. If they find you’ve failed to withhold state income tax, they may charge you penalties and interest on the unpaid amount.

Payroll Tax Due Dates in Delaware

Employers must submit payroll tax at different times according to the amount they withhold:

Due dates change annually. Refer to the 2025 withholding timetable to check the deadlines for your business.

If due dates fall on a weekend or holiday, payments are due the next business day.

Filing Methods

As an employer in Delaware, you can file, pay, and remit payroll taxes in the following ways:

• Online through the Delaware Taxpayer Portal. Payments can be made either with a portal account or as a guest
• Electronic Funds Transfer (EFT) of payments with ACH debit or ACH credit. You must fill out specific forms if paying with ACH
• Mailing forms and payments to: State of Delaware, P.O. Box 830, Wilmington, DE 19899.

Some employers are required to use electronic fund transfers. There may be penalties for using other methods of $500 or 5% of the total amount, whichever is highest.

Paying Workers' Compensation in Delaware

Employers in Delaware with one or more employees are required to carry workers’ compensation insurance. Workers’ compensation provides benefits to employees who are injured or who contract an occupational illness while working. Independent contractors are not covered by workers' compensation.

In Delaware, workers' compensation benefits include medical care, temporary disability payments, as well as compensation in the case of a resulting permanent impairment. If an injured employee dies, benefits are payable to their family.

Simplify US Payroll Tax Compliance with Deel

While this article provides essential information on Delaware state payroll and unemployment taxes, payroll compliance and state requirements can be complex and may extend beyond what is covered above. To streamline the process and ensure full compliance, companies can turn to Deel.

Deel offers a comprehensive solution for managing US and international payroll, including payments, taxes, worker classification, and more. By leveraging Deel's expertise, businesses can optimize their US payroll processes and ensure compliance with state and federal regulations.

For more information, speak with a Deel expert to explore how our services can benefit your organization.