Delaware's tax preparation market is shaped by two facts that most guides understate: a business license requirement that every paid preparer must carry, and a local wage tax in Wilmington that creates a dual-return obligation for a significant share of your clients. No exam, no CE mandate, no state registration test. What Delaware does require is a $75 annual Occupational Business License, a federal PTIN, and a working command of the state's seven-bracket income structure, the Wilmington city wage tax, the doubled pension exclusion effective TY2025, and Delaware's unusual choice-based EITC. Add the tri-state commuter corridor (Delaware, Pennsylvania, New Jersey) and the Wilmington financial and pharma employment clusters, and you have a client base that runs more complex than the state's modest size suggests. This guide covers every requirement a Delaware paid preparer needs to know for TY2025 returns filed in 2026.
Does Delaware Require a Tax Preparer License?
Delaware has no state-level license or registration requirement for non-credentialed paid tax preparers. There is no state competency exam to pass, no continuing education mandate tied to preparer registration, and no state board with authority over commercial preparers. Any individual who holds a valid federal PTIN may legally prepare Delaware individual income tax returns for compensation.
What Delaware does require is an Occupational Business License from the Division of Revenue for anyone providing tax preparation services for compensation. This is not a competency credential. It is a business license, required under Title 30, Chapter 21 of the Delaware Code, and it must be obtained and renewed each year.
Occupational Business License: Key Details
- Cost: $75 per year
- Issuing authority: Delaware Division of Revenue
- Legal basis: Title 30, Chapter 21, Delaware Code
- Renewal: Annual; required for each year you provide tax preparation services for compensation
- Competency requirement: None. This license does not involve an exam, CE, or background check specific to tax preparation
Apply online through the Delaware One Stop business portal (onestop.delaware.gov) or directly through the Division of Revenue. If you operate under an LLC or corporation, the business entity also needs the license, not just the individual preparer.
Federal PTIN and EFIN Requirements
The federal PTIN is required for all paid preparers, regardless of state. The 2026 PTIN renewal fee is $18.75 ($10.00 IRS base fee plus $8.75 third-party contractor fee). Renew annually by December 31 at irs.gov/ptin.
An EFIN (Electronic Filing Identification Number) is required if you plan to e-file Delaware returns. Delaware does not issue a separate state EFIN; participation in the IRS Fed/State e-File program covers Delaware automatically upon IRS acceptance.
FTC Safeguards Rule (WISP)
Every paid tax preparer, including solo practitioners, must maintain a Written Information Security Plan (WISP) under the Gramm-Leach-Bliley Act (15 U.S.C. 6801(b)). Required elements include a designated responsible individual, multi-factor authentication (MFA) for all systems containing customer data, a risk assessment, and an incident response plan. FTC penalties reach up to $46,517 per violation per day. A free WISP template is available in IRS Publication 5708.
Delaware Individual Income Tax: TY2025 and TY2026
Income Tax Rates and Brackets
Delaware uses a seven-bracket progressive income tax structure. The same brackets apply to all filing statuses (single, married filing jointly, married filing separately, head of household). There is no separate bracket schedule by filing status.
| Taxable Income | Tax Rate |
|---|---|
| $0 to $2,000 | 0% |
| $2,001 to $5,000 | 2.2% |
| $5,001 to $10,000 | 3.9% |
| $10,001 to $20,000 | 4.8% |
| $20,001 to $25,000 | 5.2% |
| $25,001 to $60,000 | 5.55% |
| Above $60,000 | 6.6% |
For TY2026, the same rate structure applies. No enacted changes are in effect. Note: HB 13, which would add 6.75% and 6.95% brackets for income above $125,000 and $250,000 respectively, was pending in the Delaware General Assembly as of June 2026 and has NOT been enacted. Do not apply these proposed rates until and unless the bill passes.
Standard Deduction and Personal Exemption Credit
- Standard deduction: $3,250 (single) / $6,500 (married filing jointly)
- Personal exemption credit: $110 per exemption. This is a tax credit, not a deduction. It reduces Delaware tax owed directly, dollar for dollar, rather than reducing taxable income.
Federal Income Tax Deductibility: Not Allowed
Delaware does not allow a deduction for federal income taxes paid. This deduction was repealed under 66 Del. Laws, c. 86. Do not include federal income tax as a Delaware itemized deduction.
Social Security: Fully Exempt
Social Security income is 100% exempt from Delaware income tax. There is no income-based phase-out. A client with any level of income receives full exclusion on all Social Security benefits included in federal AGI.
Pension and Retirement Income Exclusion: Doubled for TY2025
This is the most significant Delaware tax law change for TY2025 returns. Under HB 108, the pension and eligible retirement income exclusion for taxpayers age 60 and older doubled to $25,000 per taxpayer, effective TY2025. The prior limit was $12,500. Many online sources and competing guides still cite the old $12,500 figure. Verify the correct amount for every eligible client.
This exclusion applies to military retirement pay, government pensions, private pensions, and eligible retirement distributions. For a married couple where both spouses are age 60 or older, each spouse may claim up to $25,000, for a combined exclusion of up to $50,000.
Military Retirement Pay
Military retirement pay qualifies for the $25,000 pension exclusion for taxpayers age 60 and older. Dover Air Force Base (Dover, Kent County) is Delaware's largest military installation and creates a client base of active-duty personnel, retirees, and their families. Preparers in the Dover area should be fully current on this exclusion.
Capital Gains
Delaware taxes capital gains as ordinary income. There is no preferential long-term capital gains rate and no percentage deduction for long-term gains. All capital gains are taxed at the same progressive rates (0% through 6.6%) as other income. This is notably different from states like South Carolina, which provides a 44% long-term capital gains deduction.
Delaware Earned Income Tax Credit: A Choice Between Two Structures
Delaware's EITC structure is unusual: taxpayers choose between two options, and the better choice depends on each client's Delaware tax liability.
- Option A: 20% of the federal EITC, non-refundable. This can only offset Delaware income tax owed. A client with zero Delaware tax liability gets nothing from this option.
- Option B: 4.5% of the federal EITC, fully refundable. For clients with little or no Delaware tax liability, the refundable 4.5% option may produce a direct cash refund.
Calculate both options for every EITC-eligible client. For a client with meaningful Delaware tax liability, Option A (20% non-refundable) will typically produce a larger credit against taxes owed. For a client with very low or zero Delaware tax liability, Option B (4.5% refundable) may yield actual cash. The math is straightforward; the discipline is in always doing it.
Federal Conformity and OBBBA
Delaware conforms to the $40,000 SALT cap increase under the OBBBA, which flows through federal itemized deductions to the Delaware return for clients who itemize at both the federal and state levels.
Delaware does NOT conform to the following OBBBA above-the-line federal deductions. These do not flow to the Delaware return:
- Tips deduction
- Overtime deduction
- Car loan interest deduction
Clients who took these above-the-line federal deductions will have a higher Delaware AGI than their federal AGI. Communicate this to clients before filing to prevent balance-due surprises.
Wilmington City Wage Tax: 1.25%
The City of Wilmington levies a 1.25% wage tax on all gross earned income. This tax applies to two groups:
- All Wilmington residents, regardless of where they work
- All non-residents who work within Wilmington city limits, regardless of where they live
This is one of the few local income taxes in the mid-Atlantic region that applies to commuters as well as residents. Every client who lives in Wilmington or works within the city must file a Wilmington City Wage Tax return in addition to the Delaware state return.
No other Delaware city, county, or municipality levies a local income tax. The Wilmington wage tax is the sole local income tax obligation in the state.
Who Must File a Wilmington Wage Tax Return
- Wilmington residents with any earned income (W-2 wages, self-employment, etc.), regardless of where earned
- Non-residents with any earned income sourced to a Wilmington work location, even if they live in Pennsylvania, New Jersey, or elsewhere in Delaware
- Self-employed individuals who perform services within Wilmington city limits
Wilmington wage tax returns are filed with the City of Wilmington. Contact the Wilmington City Revenue Division for forms, due dates, and payment procedures. Failure to file is a common oversight for commuter clients; build a Wilmington residency and worksite question into your client intake.
Delaware, Pennsylvania, and New Jersey: The Commuter Corridor
Delaware's geography creates a multi-state compliance situation that affects a substantial portion of Wilmington-area clients. The Wilmington metro area borders both Pennsylvania (Chester County, Delaware County) and New Jersey (Salem County, Cumberland County). Common client scenarios include:
- Delaware resident, Pennsylvania or New Jersey employer: The client files a Delaware resident return and a nonresident return in the work state (PA or NJ). Credit for taxes paid to the other state applies on the Delaware return, but the calculation requires careful income allocation.
- Pennsylvania or New Jersey resident, Wilmington employer: The client owes the Wilmington 1.25% wage tax as a nonresident working inside city limits. The client also files a resident return in their home state (PA or NJ) and typically claims a credit for the Wilmington tax paid.
- Delaware address, Philadelphia employer: The Philadelphia Wage Tax (3.75% for non-residents as of 2025) applies to all wages earned in Philadelphia. The client also files a Delaware resident return. Philadelphia's wage tax is not automatically credited in the same way as a state income tax; confirm the credit treatment under Delaware's resident credit rules.
Multi-state allocation, sourcing rules, and credit calculations are a core competency for any Wilmington-area practice. Software that handles all three states (DE, PA, NJ) plus Wilmington and Philadelphia local returns is a practical necessity for this market.
Delaware E-File Mandate
Delaware has no mandatory e-filing threshold for individual returns filed by paid preparers. There is no state-imposed e-file requirement comparable to the federal 11-return threshold or South Carolina's 100-return threshold for Delaware individual income tax returns.
Electronic filing is still strongly encouraged. Delaware participates in the IRS Fed/State e-File program, and most professional tax software files Delaware returns electronically alongside the federal return with no separate submission step.
Delaware Division of Revenue: 820 North French Street, Wilmington, DE; (302) 577-8200. Key individual income tax forms: PIT-RES (full-year resident), PIT-NON (part-year resident and nonresident), PIT-UND (underpayment of estimated tax penalty).
Starting a Tax Preparation Business in Delaware
Delaware is famous as a business incorporation state, largely because of its low fees, flexible corporate law, and the Court of Chancery. Most of those benefits apply to out-of-state businesses that incorporate in Delaware while operating elsewhere. For a tax preparer who actually lives and works in Delaware, the practical formation picture is straightforward.
LLC Formation
- Certificate of Formation fee: $110 (Delaware Secretary of State)
- Annual LLC franchise tax: $300 flat fee per year (all LLCs, regardless of income or activity). Due June 1.
- Annual report for LLCs: Not required. Only the franchise tax payment is due annually.
- Occupational Business License: $75 per year (required separately for tax prep services)
Corporation Formation
- Corporation franchise tax: Starts at $175 to $400 per year depending on the calculation method chosen (Authorized Shares Method or Assumed Par Value Capital Method). A minimum franchise tax applies regardless of activity or revenue.
- Annual report: Required for corporations, filed with franchise tax payment
No Sales Tax
Delaware has no sales tax on anything, including tax preparation services. This simplifies your billing and pricing. You do not need to collect or remit sales tax on your fees, and you do not need a seller's permit or retail license for service revenue.
Annual Operating Cost Summary for a Delaware Tax Prep LLC
| Item | Annual Cost |
|---|---|
| LLC franchise tax (flat) | $300 |
| Occupational Business License | $75 |
| Federal PTIN renewal | $18.75 |
| Sales tax on services | $0 (none) |
High-Value Client Niches in Delaware
Delaware's small geographic size belies the complexity of its client base. The Wilmington metro area concentrates several high-revenue industries that produce above-average return complexity.
Financial Services and Banking (Wilmington)
JPMorgan Chase, Bank of America, and Discover Financial have major credit card and financial operations headquartered in Wilmington. Delaware's Financial Center Development Act (1981) attracted these institutions and they remain a dominant employment sector. W-2 employees at these firms commonly have:
- Deferred compensation arrangements
- Restricted stock units (RSUs) with vesting events
- Multi-state returns (Wilmington wage tax plus home state)
- High-income exposure to Delaware's 6.6% top bracket and the pending HB 13 rate proposal
Pharmaceutical and Biotech (Wilmington Metro)
AstraZeneca, Incyte Corporation, and Chemours are headquartered or maintain major operations in the Wilmington area. Clients in this sector typically present:
- RSU and ISO equity compensation from publicly traded companies
- R&D expense treatment questions
- Multi-state returns and international travel considerations
- High base salaries landing in Delaware's top bracket
Corporate Law and Court of Chancery Professionals
Delaware's Court of Chancery is the premier corporate law forum in the United States. It handles more corporate disputes than any other state court and draws significant legal talent to Wilmington. Attorney clients in this sector often have:
- Profit-sharing distributions, retainer income, and contingency fees alongside W-2 income
- Questions about business formation structure (LLC vs. professional corporation) and annual franchise tax implications
- Clients of the law firm who want you to handle entity-level Delaware franchise tax filings
Port of Wilmington Logistics
The Port of Wilmington is a working-class employment center serving longshoremen, truck drivers, and freight handlers. Clients in port operations may have:
- Multi-state W-2s from interstate trucking or logistics companies
- ILA (International Longshoremen's Association) union benefit plans
- Per-diem arrangements for over-the-road drivers
Sussex County Retirement Corridor
Southern Delaware (Rehoboth Beach, Lewes, Milford, and the Dover area) is a major retirement migration destination, drawing retirees from the DC, Baltimore, and Philadelphia metro areas. Key tax planning considerations for this market:
- Dover AFB military retirees qualify for the $25,000 pension exclusion (age 60+)
- Federal and state government retirees from the DC metro area may carry large pension income; the exclusion is a major planning item
- Part-year residents in their move year require careful multi-state handling: a PIT-NON return allocating income between Delaware and the prior home state
- Full Social Security exemption (no income phase-out) provides additional tax relief for retirees with diverse income sources
Delaware Individual Tax Forms Reference
| Form | Purpose |
|---|---|
| PIT-RES | Delaware Individual Income Tax Return (full-year resident) |
| PIT-NON | Delaware Individual Income Tax Return (part-year resident and nonresident) |
| PIT-UND | Underpayment of Estimated Income Tax penalty calculation |
Delaware Division of Revenue: 820 North French Street, Wilmington, DE 19801. Phone: (302) 577-8200. Forms and instructions are available at revenue.delaware.gov.
Frequently Asked Questions
Does Delaware require a tax preparer license?
Delaware has no state license or registration requirement for non-credentialed paid preparers. There is no exam to pass and no CE mandate tied to a preparer registration. However, anyone providing tax preparation services for compensation in Delaware must obtain a Delaware Occupational Business License from the Division of Revenue ($75 per year, renewable annually). A federal PTIN is also required for all paid preparers.
What is Delaware's top income tax rate?
Delaware's top income tax rate is 6.6% on income above $60,000. The state uses a seven-bracket progressive system, with rates from 0% (on the first $2,000) up to 6.6%. The same brackets apply to all filing statuses. No enacted changes affect this structure for TY2026; HB 13, which would create higher brackets at $125,000 and $250,000, was pending and not enacted as of June 2026.
Is there a local income tax in Delaware?
Only in Wilmington. The City of Wilmington levies a 1.25% wage tax on all gross earned income of city residents AND all non-residents who work within Wilmington city limits. Every client who lives in Wilmington or works inside the city must file a Wilmington City Wage Tax return in addition to the Delaware state return. No other Delaware city, county, or municipality has a local income tax.
What changed with Delaware's pension exemption in 2025?
For taxpayers age 60 and older, the pension and eligible retirement income exclusion doubled to $25,000 per taxpayer starting with TY2025, under HB 108. The prior limit was $12,500. Many online sources still cite the old figure. For a married couple where both spouses are 60 or older, each may claim up to $25,000, for a combined exclusion of up to $50,000. Military retirement pay qualifies for this exclusion.
How does Delaware's EITC work?
Delaware offers a choice between two EITC options: (A) 20% of the federal EITC, non-refundable, which can only offset Delaware income tax owed; or (B) 4.5% of the federal EITC, fully refundable, which may produce a cash refund for clients with little or no Delaware tax liability. Calculate both options for every EITC-eligible client. For clients with meaningful Delaware tax liability, Option A generally produces a larger benefit. For clients near zero Delaware tax, Option B may yield actual cash.
How much does it cost to start an LLC in Delaware?
Delaware LLC formation requires a $110 Certificate of Formation fee (Delaware Secretary of State). There is also a $300 annual LLC franchise tax, a flat fee due June 1 each year regardless of income or activity. No annual report is required for LLCs. Additionally, any tax prep service business must obtain the $75 annual Occupational Business License. Total first-year cost for a Delaware tax prep LLC: approximately $485 ($110 formation plus $300 franchise tax plus $75 business license).
For 2025 returns, verify how this state responds to the One Big Beautiful Bill Act provisions before filing. The state OBBBA conformity practitioner guide covers the conformity analysis workflow for tip and overtime income add-backs, bonus depreciation decoupling, and QBI adjustments in major nonconforming states.