What Is Delaware Payroll Tax?
Delaware payroll tax refers to the state and, for Wilmington employees, local payroll taxes that employers must withhold from employee wages or pay directly to state and municipal agencies. These taxes fund unemployment benefits and the state's (and Wilmington's) income tax systems.
Delaware payroll taxes are administered by two state agencies the Delaware Department of Labor's Division of Unemployment Insurance (unemployment insurance and a small companion training tax) and the Delaware Division of Revenue (state income tax withholding) plus the City of Wilmington, the only Delaware municipality currently authorized to levy its own local wage tax.
Most Delaware employers are responsible for the following payroll tax requirements:
- Unemployment Insurance (UI) and a companion Training Tax, both administered by the Division of Unemployment Insurance
- Delaware Personal Income Tax withholding, administered by the Division of Revenue, at graduated rates
- Wilmington City Wage Tax, for employees who live or work in Wilmington
Because Delaware has no state disability insurance program, employers generally have fewer moving parts to manage than in states like California or New York but employers with any connection to Wilmington need to account for that city's wage tax specifically.
Delaware Payroll Taxes at a Glance
| Payroll Tax | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| Training Tax | Employer | A small companion assessment supporting Delaware's UI system |
| Personal Income Tax (state) | Employee (withheld by employer) | Graduated state income tax withheld from employee wages |
| Wilmington City Wage Tax | Employee (withheld by employer) | Local wage tax, currently levied only by the City of Wilmington |
Understanding who pays each tax and whether Wilmington's wage tax applies to a given employee helps employers avoid the most common Delaware payroll mistake: assuming the state-level taxes are the whole picture.
Delaware Employer Payroll Tax Responsibilities
Every employer with workers in Delaware has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the Division of Unemployment Insurance and the Division of Revenue.
- Determine whether any employees live or work in Wilmington, and register with the city if so.
- Calculate taxable wages up to the annual UI wage base.
- Withhold state income tax, and the Wilmington wage tax where applicable, from every paycheck.
- Pay employer UI contributions and the companion Training Tax.
- File quarterly UI wage reports and periodic state withholding returns.
- Remit Wilmington wage tax withholding to the city.
- Maintain payroll records for state and local compliance.
Many businesses automate these tasks using payroll software, particularly for tracking Wilmington-specific withholding.
Types of Delaware Payroll Taxes
Unemployment Insurance (UI) and Training Tax
Unemployment Insurance is an employer-funded payroll tax administered by Delaware's Division of Unemployment Insurance that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own. Delaware also collects a small companion Training Tax alongside standard UI, remitted separately.
Employers pay both of these taxes directly they are never deducted from employee paychecks.
Delaware's UI wage base and tax rates are set annually by the Delaware Department of Labor, with support from the Unemployment Insurance Advisory Council, and have moved in both directions in recent years depending on the health of the state's UI Trust Fund including a period where the Secretary of Labor used emergency rulemaking authority to lower rates and provide employer relief following COVID-era trust fund contributions.
Key Facts
- Paid entirely by employers Delaware has no employee UI contribution
- Calculated on an annual wage base set by the Delaware Department of Labor, which has changed several times in recent years
- New employers pay a flat introductory rate, with a separate rate for new construction employers
- Experience-rated employers are assigned a rate based on their claims history and the state's tax rate tables for that year
- A separate, smaller Training Tax is billed and paid alongside standard UI contributions each quarter
- Must be reported to the Division of Unemployment Insurance every quarter
Delaware Personal Income Tax (PIT) Withholding
Delaware uses a graduated personal income tax structure, with rates that increase as an employee's income increases, up to a top rate of 6.6%.
Employers are responsible for:
- Withholding the correct graduated amount from every paycheck, based on current Division of Revenue withholding tables
- Reporting withholding to the Delaware Division of Revenue
- Depositing withheld taxes on a schedule based on total withholding liability (monthly, quarterly, or eighth-monthly for the largest withholders)
- Filing periodic withholding returns and an annual reconciliation, including W-2 filing with the state
Wilmington City Wage Tax
Delaware law allows cities with a population over 50,000 to levy their own local wage tax of up to 1.25%. Currently, Wilmington is the only Delaware city that does so no other municipality in the state currently meets the population threshold and has enacted the tax.
Key Facts
- Wilmington's wage tax rate is 1.25%, applying to employees who live in Wilmington, work in Wilmington, or both
- Withheld by the employer and remitted directly to the City of Wilmington, separate from state UI and income tax filings
- Applies only to Wilmington-connected employees employers with no employees living or working in Wilmington have no obligation under this tax at all
Because this tax is based on where an employee lives and/or works, employers with any Wilmington-based staff or work locations should confirm current withholding requirements directly with the city.
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| Training Tax | YES | NO |
| Personal Income Tax (state) | NO | Withheld from wages (graduated) |
| Wilmington City Wage Tax | NO | Withheld from wages (where applicable) |
Delaware places the entire unemployment tax burden (including the Training Tax) on the employer, while both layers of income tax state and, where applicable, Wilmington's local wage tax are withheld from employee wages.
Delaware Payroll Tax Rates for Employers
Understanding current Delaware payroll tax rates is essential for calculating payroll accurately. Keep in mind that both the UI wage base and rate tables have changed more than once in recent years always verify the latest figures before processing payroll.
Delaware Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | Experience-based; separate flat rates for new employers and new construction employers | Annual wage base set by the Division of Unemployment Insurance |
| Personal Income Tax (state) | Employee | Graduated, up to a top rate of 6.6% | Applies to taxable wages under current Division of Revenue withholding tables |
| Wilmington City Wage Tax | Employee | 1.25% | Applies to wages of employees who live or work in Wilmington |
According to the Delaware Department of Labor's official employer services page, the 2026 UI taxable wage base is $14,500. Note that some third-party payroll guides cite different figures for 2026 (some referencing a $10,500 or $12,500 wage base, which reflect either older or unconfirmed figures) always confirm current numbers directly against the Department of Labor's own published rate notice rather than a secondary source. New employer and experience-rated UI rate ranges are also republished annually and should be confirmed directly with the Division of Unemployment Insurance.
Instead of memorizing a specific rate, employers should focus on reviewing their annual Division of Unemployment Insurance rate notice, tracking the current wage base directly from the state's official page, and filing returns on time.
Understanding Taxable Wages
Delaware UI tax applies to taxable wages up to the annual wage base. Taxable wages generally include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Certain taxable fringe benefits
Once an employee's wages for the year cross the UI wage base, no further UI tax is owed on that employee's wages for the remainder of the year. State income tax and the Wilmington wage tax, by contrast, generally apply more broadly to wages without the same wage base cap.
Delaware Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance (Forms UC-8 / UC-8A) and Training Tax
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
State Income Tax Withholding
Delaware withholding tax is filed monthly, quarterly, or eighth-monthly depending on the amount withheld, with an annual reconciliation required regardless of deposit frequency.
Wilmington City Wage Tax
Wilmington wage tax withholding is remitted directly to the city, on a schedule set by Wilmington's own finance department. Employers with Wilmington-connected employees should confirm the specific due dates with the city directly.
If a deadline falls on a weekend or holiday, it generally moves to the next business day. Since Delaware payroll can involve state and Wilmington filings running on separate schedules, tracking them independently helps avoid missed deadlines.
How to Register for Delaware Payroll Taxes
Before paying employees, businesses typically need to register at the state level, and with Wilmington if applicable.
State registration: Employers register with the Division of Unemployment Insurance for a Delaware SUI tax number, and with the Division of Revenue for withholding tax.
Local registration: If any employees live or work in Wilmington, employers also need to register with the city for wage tax withholding.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address and all Delaware work locations
- Owner or responsible party information
- Date employees first performed services in Delaware
- Estimated payroll information
How to File Delaware Payroll Taxes
Filing payroll taxes in Delaware involves managing state obligations, and Wilmington obligations where applicable, in parallel. A typical filing process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, and other taxable compensation.
Step 2: Determine Wilmington Applicability
Confirm whether any employees live or work in Wilmington, triggering the city's wage tax.
Step 3: Calculate Payroll Taxes
Determine your employer UI contribution and Training Tax based on your current Division of Unemployment Insurance rate notice, and calculate employee withholding for state income tax and Wilmington wage tax where applicable.
Step 4: Withhold Employee Taxes
Deduct state income tax and, where applicable, Wilmington wage tax from each paycheck.
Step 5: Pay Employer Contributions and Remit Withholding
Pay employer UI and Training Tax contributions to the Division of Unemployment Insurance, remit withheld state income tax to the Division of Revenue, and remit Wilmington wage tax to the city.
Step 6: File Payroll Tax Returns
Submit quarterly UC-8/UC-8A wage reports, periodic state withholding returns, and Wilmington wage tax filings where applicable.
Step 7: Maintain Payroll Records
Keep detailed payroll records, wage information, and payment confirmations in case of future audits or compliance reviews from either the state or Wilmington.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay Delaware payroll taxes?
Most businesses that hire employees in Delaware are required to register with the Division of Unemployment Insurance and the Division of Revenue, and for employees connected to Wilmington to withhold and remit the city's wage tax. Your responsibilities may include paying employer UI and Training Tax contributions, withholding state and local income tax, filing returns, and maintaining payroll records.
What payroll taxes are employers responsible for in Delaware?
Delaware employers generally have responsibilities related to unemployment insurance and a companion Training Tax (both employer-paid), state personal income tax withholding at graduated rates, and for employees connected to Wilmington the city's local wage tax. Delaware has no state disability insurance program.
How often do employers file Delaware payroll tax returns?
Unemployment insurance and the Training Tax are reported quarterly to the Division of Unemployment Insurance. State income tax withholding is filed monthly, quarterly, or eighth-monthly depending on the amount withheld. Wilmington wage tax filing frequency is set by the city.
How do I register for Delaware payroll taxes?
Employers register with the Division of Unemployment Insurance (for a Delaware SUI tax number) and the Division of Revenue (for withholding tax) at the state level. If applicable, employers also register directly with the City of Wilmington for wage tax withholding.
What happens if payroll taxes are filed late?
Late filings or payments at the state or Wilmington level may result in penalties, interest charges, or other compliance issues. Filing accurately and on time across all applicable agencies helps avoid unnecessary costs.
Does Delaware payroll tax apply to remote employees?
If an employee performs work that is subject to Delaware payroll tax rules, employers may have Delaware payroll tax obligations even if the company is based elsewhere. Wilmington's wage tax specifically depends on whether an employee lives or works in the city, so this is worth confirming for any employee connected to that area.
Are Delaware payroll tax rates the same every year?
Not always. Delaware's UI wage base and rate tables have changed multiple times in recent years, including periods of state intervention to provide employer relief. The state's graduated income tax rates have been relatively stable, and Wilmington's wage tax rate is set independently by the city. Employers should review current Division of Unemployment Insurance, Division of Revenue, and Wilmington guidance each year before processing payroll.
Can payroll software calculate Delaware payroll taxes automatically?
Many payroll platforms automatically calculate Delaware UI and Training Tax contributions, graduated state income tax withholding, and Wilmington's local wage tax, and help employers meet filing deadlines. While automation can significantly reduce manual work, employers are still responsible for ensuring payroll information is accurate and up to date.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates and rules change frequently consult a qualified CPA or tax professional for guidance specific to your business.
