Updated: January 10, 2023
Delaware may be small in stature, but it is big in historical importance. After all, not everyone gets to call itself The First State. As a small business owner in the oldest state in America, you are also a big deal. But whether you own an old-fashioned diner in Dover or a new trendy cafe in Wilmington, there is one thing you don’t want to have to deal with: payroll taxes.
Use our Delaware Payroll Calculator
We love dealing with payroll taxes, and that’s why we’re here to help you. We designed a handy calculator to figure out your Delaware payroll and federal payroll taxes for you. All you need to do is enter wage and W-4 allowances for each employee below, and it will calculate gross pay, take out deductions, and come up with the net pay you’ll need for writing your employees’ paychecks.
Check out your states payroll taxes below
Federal Payroll Taxes
First of all, let’s give Uncle Sam his due. Below is a quick overview of what you need to know when it comes to federal payroll tax withholdings. If you would like to get into each tax withholding in detail, check out our comprehensive step-by-step guide.
- Calculate Gross Wages:
- For all your hourly employees, multiply their hours worked by their pay rate (and don’t forget to pay the higher rate for any overtime hours worked).
- For all your salaried employees, divide each employee’s annual salary by the number of pay periods your business has.
- Remember to add in bonuses, commissions, and tips as well.
- Subtract Any Pre-Tax Deductions:
- If your employees contribute to 401(k), FSA, HSA, or any other pre-tax withholding accounts, subtract the amount from their gross pay prior to applying payroll taxes.
- Deduct Federal Income Tax:
- This is the big enchilada, the biggest tax that you have to withhold from your employees. Federal income tax brackets go all the way up to 37%. We won’t get into the nitty-gritty details here, but you can find more information through the IRS Publication 15-T.
- Deduct (and Match) FICA Taxes:
- Social Security Tax: Withhold 6.2% of each employee’s taxable wages up until they reach total earnings of $160,200 for the year. Earnings above $160,200 are not taxed. As an employer, you will need to match what your employees pay dollar-for-dollar.
- Medicare Tax: Withhold 1.45% of each employee’s taxable wages up until they have reached total earnings of $200,000 for the year. There is no wage cap for Medicare. In fact, for salaries above $200,000, employees need to pay what’s called an Additional Medicare Tax of 0.9%. Only the employee is responsible for paying the Additional Medicare Tax. You as the employer will need to match the 1.45% Medicare Tax dollar-for-dollar, but you will not be responsible for matching the Additional Medicare Tax of 0.9%.
- Pay FUTA Unemployment Tax:
- You will need to pay 6% of the first $7,000 of taxable income for each employee per year, maxing out at $420 per employee per year. This one is all on you. FUTA tax is the sole responsibility of the employer. Your employees are not responsible for paying this tax. Here’s a huge caveat, though. If you pay state unemployment taxes, you are eligible for a tax credit of up to 5.4%, making your FUTA tax rate effectively 0.6%.
- Subtract Any Post-Tax Deductions:
- Some of your employees could be responsible for post-tax deductions such as court-ordered wage garnishments, child support, etc. If so, you will need to withhold these deductions from their paychecks.
2023 Delaware State Payroll Taxes
Now that we’re done with federal income taxes, let’s tackle Delaware state taxes. The State of Delaware has a progressive income tax, similar to how the federal income tax works. The more money your employees make, the higher the income tax. Tax rates range from 0% to 6.6%. Employees who make more than $60,000 will hit the highest tax bracket.
Wilmington City Tax
On top of paying Delaware state taxes, employees who live or work in Wilmington have to pay a local city tax. You will need to withhold 1.25% from their paychecks.
Delaware State Unemployment Insurance (SUI)
As an employer, you’re responsible for paying state unemployment insurance, which covers those unemployed through no fault of their own. The wage base in Delaware is $18,500 for 2023, and rates range from 0.3% to 8.2%.
If you’re a new employer, rates vary from 1.8% to 2.3%. If you’re a new employer in the construction industry, you’ll have to pay 2.3%.
Remember, paying your SUI in full and on time qualifies you to get a whopping 90% off of your FUTA tax bill, so make sure you pay attention to the due dates.
Now Write Those Paychecks!
That’s it! You’ve done it! You’ve checked “payroll taxes” off your to-do list so you can move onto important things like growing your small business. Once each employee’s net pay is calculated, you’re in the clear. All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA and unemployment taxes. Those numbers can add up quickly!
You will need to use Form 941 to file federal taxes quarterly, and Form 940 to report your annual FUTA tax. You can pay taxes online using the EFTPS payment system. More information about employment tax due dates can be found here.
Additional Delaware Payroll Tax Resources:
Our calculator is here to help, but of course, you can never learn enough, especially when it comes to payroll taxes. Here are some additional resources and contact information to help you run Delaware payroll:
These rates are based on local legislation and can change at any time. Always consult a tax professional if you are unsure about your obligations.