Delaware Payroll Taxes: Complete Guide for Employers [2025]

Delaware payroll taxes come with unique rules that employers need to follow carefully. Missteps can lead to compliance issues, employee frustration, or even penalties. Knowing the specifics ensures accurate withholding and smooth payroll processing.

State income tax withholding in Delaware has its own structure, including defined brackets, a required state-specific W-4 form, and clear filing deadlines. Employers must stay on top of these requirements to meet state obligations and support employees.

This guide explains how Delaware state income tax withholding works, covering tax brackets, standard deductions, W-4 form requirements, and employer responsibilities. Let's break it down step by step.

Delaware State Income Tax Withholding

Delaware state income tax applies to employee earnings based on progressive tax brackets. The rates range from 2.2% to 6.6%, depending on income. Employees earning over $60,000 annually fall into the highest bracket. Standard deductions are $3,250 for single filers and $6,500 for married filers filing jointly.

Delaware requires a state-specific W-4 form for withholding calculations. Employees must submit the Delaware W-4 to specify marital status and exemptions. Without this form, employers default employees to Single status with zero exemptions, often resulting in higher tax withholdings. The Delaware W-4 became mandatory for new submissions starting in 2020.

To calculate annual Delaware tax withholding, employers subtract pre-tax contributions, such as retirement plan deferrals or health benefits, from the employee's gross wages. Adjusted gross wages are then annualized by multiplying by the number of pay periods in the year. Employers apply the standard deduction to determine taxable income, use the state's tax brackets to calculate withholding, and subtract exemption allowances. The final step divides the annual withholding by the number of pay periods to determine the per-paycheck amount.

Employers must issue W-2 forms to employees by January 31 each year and file annual reconciliations (W-3 forms) with the Delaware Division of Revenue. The W-3 form summarizes all wages and withholdings reported for employees over the previous year.

Action Points for Employers

• Distribute and collect Delaware W-4 forms from all new hires and employees updating their withholding status.

• Track whether employees are using standard or itemized deductions to ensure withholding accuracy.

• Follow the required schedule for submitting withheld taxes, which can be monthly, quarterly, or eighth-monthly based on total liability.

Delaware State Unemployment Insurance (SUI)

Delaware State Unemployment Insurance (SUI) requires all employers to pay a quarterly tax to support benefits for unemployed workers. This tax applies only to employers, not employees. Staying compliant with SUI regulations ensures your business avoids fines and supports the state unemployment system effectively.

In 2025, the SUI wage base in Delaware applies to the first $10,500 of each employee's earnings. This means you will only calculate SUI taxes on wages up to this threshold for each worker. Wage base limits are reviewed annually, so it's important to confirm the correct limit at the start of each year.

SUI tax rates depend on your business's history with unemployment claims. New employers are assigned a standard rate, which is typically higher than the rate for businesses with established employment records. Rates for experienced employers range from 0.3% to 8.2%, based on payroll size and prior claims.

Quarterly payments are mandatory. To calculate your liability, multiply each employee's taxable wages (up to the $10,500 wage base) by your assigned SUI tax rate. Add the totals for all employees to determine the payment amount. File and pay using the UC-8 and UC-8A forms or Delaware's online portal. Missing deadlines can lead to penalties, so plan ahead to submit on time.

Action Points for Employers

• Obtain an SUI account number by registering with the Delaware Department of Labor before running payroll.

• Track each employee's earnings closely to stop calculating SUI taxes once the $10,500 wage base is met.

• Review annual updates to wage base limits and tax rates by December to ensure accurate calculations for the new year.

Wilmington Local Wage Tax

The City of Wilmington enforces a 1.25% wage tax on all employees who live or work within its boundaries. This tax applies to residents and non-residents earning wages in the city. Employers must withhold this amount from employee paychecks and ensure accurate reporting and timely remittance to the city.

For businesses operating in Wilmington, additional local obligations may include the Earned Income Tax (EIT) and the Net Profits Tax. The EIT specifically targets wages, while the Net Profits Tax focuses on income generated from Wilmington-based business activities. Each tax has its own reporting and submission requirements, which must be handled separately from state and federal filings.

Employers need to register with the City of Wilmington to comply with local payroll tax mandates. Registration ensures that the business is properly set up to withhold and remit taxes. The city provides specific forms, such as the WCWT-5 for annual reconciliations, and deadlines must be followed to avoid penalties.

Action Points for Employers

• Confirm which employees either live in Wilmington or earn wages from work performed in the city to determine tax withholding requirements.

• Deduct the 1.25% wage tax from applicable employee paychecks and verify accuracy each pay period.

• Submit local wage taxes using Wilmington's required forms and filing systems, keeping them separate from state and federal tax submissions.

Delaware Paid Family and Medical Leave (PFML)

On January 1, 2025, Delaware’s Paid Family and Medical Leave (PFML) program officially began. Employers across the state are now responsible for managing contributions and ensuring eligible employees can access paid leave for qualifying family and medical reasons. Clear processes and compliance are necessary to meet these new obligations smoothly.

Covered Employee Eligibility and Employer Responsibilities

The PFML program applies to employees who have worked for at least 12 months and logged 1,250 hours during that time. Employers with 10 or more employees must contribute to the program, while those with fewer than 10 are exempt from the employer portion but still need to facilitate employee contributions when required.

Contributions are shared between employers and employees. Employers can deduct up to 50% of the total contribution from employee wages, while covering the remaining portion themselves. For instance, if the total contribution is 1% of wages, employers may deduct 0.5% from employees and fund the other 0.5% directly.

Notifications and Leave Documentation

Employers must inform employees about the PFML program in writing. This includes outlining eligibility, the duration of benefits, and how to request leave. Notifications should be provided through clear channels such as employee handbooks or during onboarding.

Tracking employee leave requests is a required component of compliance. Employers need to document the duration of leave and ensure it stays within the approved limits. Certifications, such as proof of a medical need or a qualifying family event, must be collected and securely filed to meet compliance standards.

Private Plan Options for Employers

Employers can choose to implement a private PFML plan instead of opting into the state-run program. However, private plans must meet or exceed the benefits provided by the state program. Approval from Delaware's designated agency is required before moving forward with a private plan. Employers must submit documentation detailing the plan's terms and financial stability for review and approval.

Action Points for Employers

• Register with Delaware's PFML agency to begin withholding contributions.

• Decide whether to split PFML contributions with employees or cover the full amount.

• Provide employees with written information about PFML benefits, eligibility, and procedures.

• Track leave usage closely and maintain required documentation for compliance.

• Submit private plan applications and supporting documents for agency approval if opting out of the state program.

Registration and Filing Deadlines

Employers must register with the Delaware Division of Revenue for state income tax withholding and the Department of Labor for SUI. Each registration assigns a unique account number required for tax reporting and payments. Without proper registration, you cannot legally withhold or remit payroll taxes in Delaware.

Filing schedules for Delaware payroll taxes depend on the volume of taxes withheld. Employers may need to file on a monthly, quarterly, or eighth-monthly basis. For SUI, quarterly filings are standard, while withholding taxes follow state-determined schedules based on prior tax liability. Annual reporting, including W-2 and W-3 forms, is mandatory and must be completed on time to avoid penalties.

Key Deadlines

• Quarterly SUI Filing: Submit Form UC-8 and UC-8A by the last day of the month following the end of each quarter. For example, second-quarter filings are due by July 31.

• Withholding Tax Returns: Monthly returns are due on the 15th of the following month. Quarterly returns are due on the last day of the month after the quarter ends.

• Annual Reporting: Distribute W-2 forms to employees by January 31. File the W-3 reconciliation form with the Division of Revenue by the same date.

Action Points for Employers

• Determine your filing frequency using Delaware's lookback period, which reviews the previous year's total withholdings.

• Set firm reminders for all tax deadlines. Use an automated payroll system if needed to ensure accuracy and on-time submissions.

• Double-check that all reporting forms match the records submitted to the IRS to avoid discrepancies.

Payment Methods and E-Services

Handling Delaware payroll taxes effectively starts with using the Delaware Taxpayer Portal. This online platform simplifies the process of filing returns, submitting payments, and managing tax records. It eliminates the need for manual submissions, giving employers a faster, more reliable way to stay compliant.

To enroll, gather your business information, including your employer identification number (EIN) and any state-assigned tax account numbers for withholding or SUI. The portal requires this information to link your account accurately. Payments can be made using ACH debit or electronic funds transfer (EFT), both of which are secure and allow for direct, timely submissions.

For businesses operating multiple entities or with several tax IDs, payments must be submitted separately for each account. The system does not consolidate payments across accounts, so confirm that each transaction is tied to the correct EIN or SUI account number. Misallocating payments can result in delays or additional steps to resolve discrepancies.

Action Points for Employers

• Enroll in the Delaware Taxpayer Portal with accurate business details, including tax IDs and account numbers.

• Use ACH debit or EFT for secure, on-time payments.

• Confirm payment details to ensure accuracy, especially when managing multiple tax accounts.

• Keep payment confirmations and filing receipts for your records to address any future questions or audits.

Common Employer FAQs

Employers managing Delaware payroll taxes often encounter recurring questions about tax rates, withholding, and compliance. Below are straightforward answers to help clarify the most common concerns.

Does Delaware have payroll taxes?

Yes, Delaware payroll taxes include state income tax withholding and State Unemployment Insurance (SUI). Employers must withhold state income tax from employee wages based on Delaware's tax brackets and the employee's Delaware W-4 form. Additionally, SUI must be paid by employers on wages up to the state's annual taxable wage base. For employees working or living in Wilmington, a 1.25% local wage tax is also required.

How much tax does Delaware take out of your paycheck?

The amount withheld from employee paychecks depends on taxable income, filing status, and local tax obligations. Delaware's state income tax rates range from 2.2% to 6.6%, with the highest rate applying to income over $60,000. Local taxes, such as Wilmington's 1.25% wage tax, are added for employees who live or work in the city. Employers calculate the exact withholding using the state's tax tables and the information provided on the Delaware W-4.

What is the withholding tax rate in Delaware?

Delaware's withholding tax rate varies based on income. The highest bracket is 6.6% for income over $60,000. Lower brackets begin at 2.2% for income above $2,000. Employers use the Delaware-specific withholding tables to calculate deductions. The Delaware W-4 determines filing status, exemptions, and other adjustments, which influence the final withholding amount for each paycheck.

What is the SUTA rate in Delaware?

The SUI tax rate in Delaware is assigned based on the employer's claims history and ranges from 0.3% to 6.5% for established businesses. New employers are generally assigned a standard rate between 1.0% and 1.2%. SUI applies to the first $10,500 of each employee's wages in 2025. Employers must confirm their specific rate and the annual taxable wage base to ensure accurate calculations and timely payments.

Handling Delaware payroll taxes requires careful attention to calculations, deadlines, and compliance updates. Accurate withholding ensures employees meet state obligations while employers avoid penalties.

Navigating the complexities of Delaware payroll taxes can be challenging, but with the right tools and guidance, you can ensure compliance and accuracy. We're here to help you streamline your payroll processes and avoid costly mistakes. Book a demo with us today to learn how our comprehensive HR software can simplify your Delaware payroll tax management.