Delaware Tax Guide: No Sales Tax Advantage

Tax Overview

Delaware is known as a tax-friendly state thanks to its complete absence of a sales tax, making it a popular shopping destination for residents of neighboring states. The state compensates for this lost revenue through a progressive income tax with rates reaching 6.6% on income above $60,000. While this top rate is moderate compared to states like California or New York, it applies at a relatively low income threshold.

The state's lack of sales tax extends to all purchases, including clothing, electronics, and vehicles. This can result in significant savings for residents, particularly on large purchases. Combined with no state-level tax on Social Security benefits, Delaware offers a compelling tax profile for retirees and consumers alike.

Property taxes in Delaware are among the lowest in the nation, with an effective rate well below 0.6%. The state also does not impose an inheritance tax on most beneficiaries. However, Delaware does have a relatively high gross receipts tax on businesses, which functions similarly to a very low-rate sales tax that businesses must absorb or pass along indirectly. The state also imposes a real estate transfer tax on property sales.