Delaware LLCs pay state income tax through the LLC itself, not through owners' personal returns, unless the LLC chooses to be taxed as a corporation or partnership

Delaware does not tax LLC income at the entity level. Instead, the LLC files an annual report with the Delaware Division of Corporations, but the actual income tax responsibility flows to the owners. How you pay depends on how your LLC is taxed for federal purposes — and that choice determines what you owe Delaware and when.

If your LLC is taxed as a sole proprietorship (single owner, no election) or partnership (multiple owners, no election), you report the LLC's income on your personal tax return and pay Delaware income tax on your share. If you have elected to be taxed as an S corporation or C corporation, the rules change: a C corporation pays Delaware corporate income tax, and an S corporation still passes income to owners but with different withholding rules.

The key is that Delaware's tax system follows your federal tax classification. You do not pay Delaware tax twice — once at the LLC level and once at the owner level. You pay once, at whichever level the IRS says the income belongs.

Key Takeaways

  • Delaware LLCs taxed as sole proprietorships or partnerships do not pay entity-level income tax; owners report income on personal returns and pay Delaware income tax on their share.
  • Delaware LLCs taxed as C corporations must pay Delaware corporate income tax on net income, separate from owner income tax.
  • Estimated tax payments are due quarterly (April 15, June 15, September 15, and January 15) if you expect to owe more than $100 for the year.
  • You can pay Delaware income tax and estimated taxes through the Delaware Division of Revenue's online portal or by mail using Form DE-9.
  • The Delaware annual report fee ($125 for most LLCs) is separate from income tax and is due by March 1 each year.

How Delaware taxes LLCs taxed as sole proprietorships or partnerships

If your LLC has one owner and you have not made a federal tax election, the IRS treats it as a sole proprietorship. If your LLC has multiple owners and you have not made an election, the IRS treats it as a partnership. In both cases, Delaware does not tax the LLC itself — it taxes you, the owner or owners.

You report the LLC's net income on your personal Delaware income tax return (Form DE-1) and pay tax on your share at the individual rate. Delaware's income tax brackets range from 2.2% to 5.75%, depending on your total income. The LLC itself files no income tax return with Delaware; instead, it files an annual report with the Division of Corporations (due by March 1, with a $125 fee for most LLCs).

If you are a non-resident owner, you still owe Delaware tax on income from Delaware sources. If you are a resident, you owe tax on all income, regardless of where it was earned. The LLC does not withhold or remit tax on your behalf — that responsibility is yours.

How Delaware taxes LLCs taxed as C corporations

If you have filed Form 8832 with the IRS to elect C corporation taxation, your LLC is treated as a corporation for both federal and Delaware purposes. Delaware then taxes the LLC's net income at the corporate rate, which is a flat 8.7% on net income above $25,000 (lower rates apply to income below that threshold).

The LLC files a Delaware corporate income tax return (Form 1100) by the 15th day of the fourth month after the end of your tax year — typically June 15 for calendar-year businesses. You pay the tax shown on that return to the Delaware Division of Revenue. Owners then pay personal income tax on any dividends they receive from the LLC, but not on the LLC's retained earnings.

This structure creates a potential double-tax situation: the LLC pays corporate tax on its income, and owners pay personal tax on distributions. Many small businesses avoid this by choosing S corporation or partnership taxation instead.

How Delaware taxes LLCs taxed as S corporations

If you have filed Form 2553 with the IRS to elect S corporation taxation, your LLC is treated as an S corporation for both federal and Delaware purposes. Delaware does not tax S corporation income at the entity level — instead, income passes through to owners, similar to a partnership.

The LLC files a Delaware S corporation return (Form 1120-S) by the 15th day of the third month after the end of your tax year — typically March 15 for calendar-year businesses. Owners then report their share of income on personal returns and pay Delaware income tax at individual rates.

The advantage of S corporation taxation is that you can split income between W-2 wages (which you pay yourself and on which you pay payroll tax) and distributions (which avoid self-employment tax). However, Delaware still requires the LLC to file the annual report and pay the $125 fee, just as it would for any other structure.

Estimated tax payments for Delaware LLC owners

If you expect to owe more than $100 in Delaware income tax for the year, you must make quarterly estimated tax payments. These are due on April 15, June 15, September 15, and January 15. The amount you owe depends on your expected income and your tax bracket.

To calculate your estimated payment, estimate your total Delaware taxable income for the year, apply the appropriate tax rate, subtract any tax you expect to have withheld from W-2 wages or other sources, and divide the result by four. You can pay more than one-quarter at a time if you prefer, or adjust your payments if your income changes during the year.

Underpayment penalties apply if your total estimated payments fall short of 90% of your current-year tax or 100% of your prior-year tax (110% if your prior-year income was over $150,000). The penalty is calculated daily and compounds, so it is worth paying on time even if you are not certain of the exact amount.

Where and how to pay Delaware LLC taxes

You can pay Delaware income tax and estimated taxes through the Delaware Division of Revenue's online payment portal at dnrec.delaware.gov/revenue. The portal accepts credit card, debit card, and electronic bank transfer. There is no fee for bank transfer, but credit and debit card payments incur a processing fee (typically 2.5% to 3%).

You can also pay by mail using Form DE-9 (Estimated Tax Payment Voucher for Individuals). Send the form and your check to the Delaware Division of Revenue, Wilmington, Delaware 19801. Include your name, Social Security number or FEIN, and the tax year. Mail payments should arrive at least five business days before the due date to be considered on time.

If you are a C corporation LLC, you can pay corporate income tax through the same online portal or by mail. Use Form 1100-V (Corporate Income Tax Payment Voucher) and send it with your check to the same address.

The Delaware annual report fee is separate from income tax

Every Delaware LLC must file an annual report with the Division of Corporations by March 1 each year. The fee is $125 for most LLCs (higher for certain industries or if you have a registered agent). This fee is not an income tax — it is a filing fee for maintaining your LLC's legal status in Delaware.

You can file the annual report online through the Division of Corporations' portal at dnrec.delaware.gov/corporations. The report takes about 10 minutes to complete and requires basic information: your LLC name, registered agent, principal place of business, and member names and addresses.

If you miss the March 1 deadline, your LLC will be dissolved automatically. You can restore it by filing a Certificate of Restoration and paying a restoration fee, but this is more expensive and time-consuming than filing on time. Set a calendar reminder for late February.

What to do if you cannot pay on time

If you cannot pay your Delaware income tax or estimated tax by the due date, you can request an extension or a payment plan. Contact the Delaware Division of Revenue at (302) 577-8660 or visit their website to learn about your options.

Interest accrues on unpaid tax at the rate set by Delaware law (currently 8% per year, compounded daily). Penalties also apply: a failure-to-pay penalty of 0.5% per month (up to 25% total) and, if you file late, a failure-to-file penalty. Paying as soon as possible, even if you cannot pay the full amount, reduces the total interest and penalties you will owe.

If you are facing a genuine hardship, the Division of Revenue may grant a short-term extension (typically 30 to 60 days) or allow you to set up a payment plan. You must request this before the due date if possible, though you can also request it after if you have a documented reason for the delay.

Frequently Asked Questions

Do I have to pay Delaware income tax if my LLC is based in Delaware but I live in another state?

If you are a non-resident owner, you owe Delaware tax only on income from Delaware sources — typically income earned by the LLC itself. You do not owe Delaware tax on your personal income earned outside Delaware. However, your home state may tax you on the LLC income you receive as a distribution, so you may end up paying tax in both states.

Can I deduct business expenses from my Delaware income tax return?

Yes. If you are taxed as a sole proprietor or partner, you report net income (revenue minus business expenses) on your personal return. If you are taxed as a C corporation, the LLC deducts expenses before calculating taxable income. Keep detailed records of all business expenses, including receipts and invoices.

What happens if I miss an estimated tax payment deadline?

You will owe a penalty and interest on the unpaid amount. The penalty is calculated based on how much you underpaid and for how long. You can still make the payment after the deadline, but interest and penalties will accrue. If you expect to miss a payment, contact the Division of Revenue to discuss a payment plan.

Do I need to file a separate Delaware return if I already filed a federal return?

Yes. Your federal return and Delaware return are separate filings. If you are taxed as a sole proprietor or partner, you file Form DE-1 (Delaware individual income tax return) in addition to your federal Form 1040. If you are taxed as a C corporation, you file Form 1100 (Delaware corporate return) in addition to federal Form 1120.

Is the $125 annual report fee deductible as a business expense?

Yes. The annual report fee is a cost of maintaining your LLC and can be deducted as a business expense on your tax return. Keep the receipt or confirmation email from the Division of Corporations as proof of payment.