Understanding your tax obligations in Delaware is important for individuals and businesses alike. And for the 2023 tax year, there are some few changes in the Delaware state tax laws you need to be aware of. Whether you’re a resident or non-resident, this article breaks down key changes, important deadlines, and essential information to help you navigate the tax landscape. Stay up-to-date and ensure compliance with this up-to-date resource.
1. New Checkboxes on Personal Income Tax Forms
The Delaware Division of Revenue introduces new checkboxes on personal income tax forms for the 2023 tax year. These checkboxes simplify the claiming of certain deductions or credits. For instance, there can be checkboxes for contributions to Delaware-sponsored tuition programs, ABLE programs, or to indicate if you qualify for the full military pension deduction. Carefully review your tax form to understand how these checkboxes affect your filing.
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2. Organ and Bone Marrow Transplantation Tax Credit
Delaware reveals a new tax credit to incentivize organ and bone marrow donations. If you donated an organ or bone marrow in 2023, you are eligible for a tax credit to offset your unreimbursed medical and other expenses that relate to the donation. The credit is capped at $10,000 of unreimbursed expenses, and you need to provide specific documentation to claim it.
3. HSCA Rate Decrease Effective January 2024
While the decrease in the Hazardous Substance Cleanup Act (HSCA) rate does not directly impact the 2023 tax year, it’s important to understand its implications for the future. The HSCA rate begins to decrease in January 2024. This adjustment means that your business is following the HSCA regulations—typically if you deal with handling hazardous substances—and is eligible for a reduction in your tax rate. Although this change doesn’t affect the 2023 tax filings, it only lowers your tax liabilities for the 2024 tax year if your business falls under HSCA compliance requirements.
4. Updates to Tax Rates or Brackets
For 2023, Delaware’s state income tax rates remain progressive, ranging from 0% for income up to $2,000 to 6.6% for income over $60,000. Intermediate rates include 2.2% on income between $2,001 and $5,000, 3.9% on $5,001 to $10,000, 4.8% on $10,001 to $20,000, 5.2% on $20,001 to $25,000, and 5.55% on $25,001 to $60,000. These brackets mean that the state taxes you only on income above each threshold the corresponding rate, so if your income increases in 2023, you move into a higher bracket, affecting the amount of tax you owe.
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5. Modifications to Deductions or Credits
The state revises the parameters for certain deductions, such as those that have to do with education expenses and property taxes. For instance, Delaware increases the income threshold for eligibility for some credits, which allow you to benefit from them. Additionally, new credits or expanded eligibility for existing ones are available for green energy investments or local business support.
6. New Tax Incentives or Programs
Delaware introduces several new tax incentives and programs in 2023 to stimulate economic growth and support various sectors. The state launches enhanced incentives you can enjoy if you have a business that deals with renewable energy projects. Additionally, Delaware expands its support to boost your venture financially by providing new tax credits for hiring local employees and investing in workforce development. There are also increased incentives for research and development activities, encouraging innovation within the state. These updates foster a more dynamic business environment and present valuable opportunities for tax savings if you have anything in motion in these areas.
Next Step to Take
- Leverage the increased standard deduction: Delaware has raised its standard deduction limits for 2023. If you don’t have a lot of itemized deductions, taking advantage of this higher standard deduction can simplify your filing process and potentially reduce your taxable income.
- Maximize contributions to retirement accounts: Contributions to retirement accounts like a 401(k) or IRA can reduce your taxable income. Delaware’s tax laws align with federal guidelines, so ensuring you’re maximizing these contributions can provide significant tax benefits.
- Claim available tax credits: Delaware offers various tax credits that can directly reduce your tax liability. Check if you qualify for credits such as the Earned Income Tax Credit (EITC) or the Child and Dependent Care Credit. Claiming these credits can help lower your overall tax bill.
- Stay informed on property tax relief: The state offers property tax relief programs for eligible homeowners. If you meet the criteria, applying for these relief programs can reduce your property tax burden and potentially provide financial savings.
- Track your qualified education expenses: Delaware allows deductions for certain education-related expenses. Keep detailed records of tuition, fees, and other qualified educational expenses. This can help you take advantage of any available education-related tax breaks.
- Monitor changes to estate and inheritance taxes: Delaware’s estate and inheritance tax laws can impact your financial planning. Stay updated on any changes to these taxes to ensure you’re prepared and can take advantage of any exemptions or deductions available for estate planning.
Recap
In 2023, Delaware State introduces several significant updates to its tax system, offering both new opportunities and changes to be aware of. To simplify your filing process, new checkboxes add to the update which directly impacts the personal income tax forms. Additionally, Delaware now offers an Organ and Bone Marrow Transplantation Tax Credit, which provides a valuable tax break if you undergo or support such medical procedures.
From January 2024, you now benefit from a decrease in the HSCA rate, which help lower certain tax liabilities. This year also sees updates to tax rates and brackets, which can impact your overall tax responsibility. Modifications to existing deductions and credits mean it’s important to review how these changes affect your filings. Additionally, Delaware introduces new tax incentives and programs that can offer further financial advantages.
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