Delaware's layered system
How does Wilmington's tax fit into Delaware's unusual system?
Delaware has no sales tax, which makes it famous for tax-free shopping. But the state compensates with relatively high income taxes. Delaware's state income tax is graduated from 2.2% to 6.6% on income above $60,000. On top of that, Wilmington adds its own city wage tax.
What makes Delaware further unusual is that some counties also levy taxes. New Castle County (where Wilmington is located) may have its own tax obligations. The result is that a Wilmington resident can face federal tax, Delaware state tax, New Castle County tax and Wilmington city wage tax on the same earned income.
For the current Wilmington city wage tax rate, check the City of Wilmington Department of Finance. The rate is set by city ordinance and applies to gross wages, not taxable income.
Who pays the Wilmington wage tax?
Both residents and nonresidents who work within Wilmington city limits owe the wage tax. This is significant because Wilmington is a major employment center, with many workers commuting from Pennsylvania (Chester and Delaware Counties) and New Jersey (Salem County). These interstate commuters owe the Wilmington wage tax on their city-source wages.
Pennsylvania and Delaware have a reciprocal agreement for state income taxes, meaning PA residents working in Delaware pay PA state tax instead of DE state tax. However, the Wilmington city wage tax is a local tax and is not covered by this state reciprocity. PA commuters pay the Wilmington city tax regardless of the state-level agreement.
Wilmington residents owe the city tax on all earned income, whether earned inside or outside the city. If a Wilmington resident works in Philadelphia, they owe both the Wilmington resident tax and the Philadelphia nonresident wage tax. The combined local tax burden for such a commuter is substantial.
How does filing work?
Employers within Wilmington withhold the wage tax from employee paychecks. If your employer is outside Wilmington and does not withhold, you must file and pay directly with the City of Wilmington. The city has its own filing deadlines and forms, separate from the Delaware state return.
Self-employed individuals working in Wilmington must file the city return and pay on net self-employment income earned within city limits.
What if your employer withholds incorrectly?
Incorrect withholding most often occurs with new employees whose payroll setup defaults to the wrong locality. If you are a nonresident and your employer withholds at the resident rate, or fails to withhold at all, you will need to reconcile on your annual Wilmington return. Over-withholding results in a refund; under-withholding results in a balance due. Contact the Wilmington Department of Finance for the correction process.
How does Wilmington compare to other Delaware localities?
Most Delaware cities do not levy a city wage tax. Wilmington is the primary exception as the state's largest city. The lack of a city wage tax in other Delaware locations is one reason some employers choose to locate in suburban New Castle County or in Kent/Sussex Counties rather than downtown Wilmington. For workers, the difference between a Wilmington address and a suburban address can mean several hundred to several thousand dollars per year in additional local tax.
What is the combined tax burden for a Wilmington worker?
Worked example: $70,000 salary, single filer, Wilmington resident
| Tax layer | Approximate amount |
|---|---|
| Federal income tax | ~$7,800 |
| FICA (employee share) | ~$5,355 |
| Delaware state income tax (graduated) | ~$3,300 |
| Wilmington city wage tax | Varies by current rate |
| Estimated take-home | Check current rates |
Illustrative framework. Delaware's state brackets range from 2.2% to 6.6%. The Wilmington city wage tax adds to this. Use our Delaware take-home calculator for a personalized estimate with the current city rate.
What about self-employed workers in Wilmington?
Self-employed individuals who perform services within Wilmington city limits must file the city wage tax return and pay on their net self-employment income. If you operate a business from a Wilmington address, all business income is generally subject to the city tax. If you are self-employed and work from multiple locations, you allocate income based on the proportion of work performed within Wilmington.
The self-employment filing is separate from the employer-withheld version. You file directly with the Wilmington Department of Finance. Quarterly estimated payments may be required if your annual liability exceeds the city's threshold.
Questions
Wilmington Wage Tax FAQ
What is the Wilmington wage tax rate?
Wilmington charges a city wage tax on earned income. The rate is set by city ordinance. For the current rate, check the City of Wilmington Department of Finance. The tax applies to both residents and nonresidents working within Wilmington city limits.
Do Pennsylvania commuters pay Wilmington wage tax?
Yes. PA-DE state reciprocity covers state income taxes only. The Wilmington city wage tax is a local tax and is not exempted by the state reciprocal agreement. PA residents commuting to Wilmington owe the city tax on their Wilmington-source wages.
Does Wilmington tax investment income?
No. The Wilmington wage tax applies to earned income only: wages, salaries, commissions and net self-employment income. It does not apply to interest, dividends, capital gains, pensions or Social Security. Delaware state income tax covers a broader income base.
Is Wilmington the only Delaware city with a wage tax?
Wilmington is the primary Delaware city that levies a city wage tax. Most other Delaware municipalities do not have a comparable local income or wage tax. This makes Wilmington somewhat unique within the state.
How do I file for a refund if my employer over-withheld?
File your annual Wilmington wage tax return with the City of Wilmington Department of Finance. If the return shows you were over-withheld (for example, if the resident rate was applied but you are a nonresident), the excess will be refunded. Contact the Department of Finance for specific forms and filing instructions.
- Sources: City of Wilmington Dept. of Finance · Delaware Division of Revenue · DE Code Title 22.
- Last updated July 31, 2026
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