With a diverse talent pool, favorable corporate tax rate, and one of the top-ranked business environments in the country, Delaware is an excellent state for small operations and large enterprises alike.
Whether you already own a business in Delaware or want to start one, here are the eight tax incentive programs you should know about.
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Delaware tax incentives for businesses
New Business Facility Tax Credit
Delaware’s New Business Facility Tax Credit rewards companies for creating new jobs and investing in business facility expansion or development projects.
For qualified facilities placed in service after June 30, 2011, a company can get a corporate income tax credit of $500 per qualified employee hired (with a minimum of five jobs created) and $500 for each $100,000 capital investment on a qualified activity (with a minimum $200,000 investment).
Qualified activities include:
- Manufacturing
- Wholesaling
- Scientific, agricultural, or industrial research, development, or testing
- Computer processing, data preparation, or processing services
- Engineering services
- Consumer credit reporting services, including adjustment and collection services and credit reporting services
- Aviation services
- Non-custom computer software
- Telecommunications services
- The administration, management, or support operations, including marketing, of any activity described above
What’s more, if your company creates a new facility on a brownfield site, your New Business Facility Tax Credit increases to $900 per qualified employee and $900 per $100,000 capital investment.
If your company manufactures solar power devices, fuel cells, wind power devices, or geothermal power devices, your New Business Facility Tax Credit is $750 per new job created.
Learn more about the credit here and download the application here.
New Economy Jobs Tax Credit
With the New Economy Jobs Tax Credit, companies can get withholding tax credits for creating new jobs that pay within a certain range. If you qualify for the credit, you can get up to 40% of your withholding taxes paid on behalf of your employees.
In order to qualify, your business needs to create a minimum of 50 new jobs in Delaware and pay your hired employees a specified amount ($100,000 multiplied by the inflation adjustment factor).
You might be eligible for additional New Economy Jobs Tax Credits if you create new jobs in targeted growth zones, incorporated municipalities, and designated brownfield sites. Apply for the credit here.
In the meantime, check out the Delaware employer’s guide to hiring new employees.
Research and Development Tax Credit
Delaware offers its own state Research and Development (R&D) Tax Credit for businesses engaging in qualified R&D activities. Those activities must be technological in nature; used to improve the functionality, performance, reliability, or quality of a new or existing business component; used to gather information that will help eliminate uncertainty around the development of a product; and involve a process of experimentation, such as testing or modeling.
If you qualify, you can get a credit equal to either 1) 10% of the excess of your total qualified R&D expenditures over a base amount or 2) 50% of Delaware’s apportioned share of your federal R&D tax credits.
To calculate your business’s R&D credit amount and apply for the credit, download this form.
Related: Here’s everything you need to know about the federal R&D credit.
Land and Historic Resource Conservation Tax Credit
Delaware’s Land and Historic Resource Conservation Tax Credit encourages companies to donate eligible land and properties to public agencies and non-profit organizations for use. If your company donates an eligible property or piece of land, you can get a credit of 40% of the land’s fair market value (up to $40,000) to offset your personal and corporate income taxes.
In order to qualify for the credit, your donation needs to first be approved by the Delaware State Historic Preservation Office. Get more information on the credit here and apply here.
Historic Preservation Tax Credit
The Historic Preservation Tax Credit motivates businesses to invest in rehabilitating historic properties around Delaware. Eligible businesses can get a credit equal to 20% to 40% of their qualified rehabilitation expenditures.
To qualify for the credit, you need to rehabilitate a property listed on the National Register of Historic Places and meet the Secretary of the Interior’s guidelines for restoring a historic property.
Visit this page to learn more about the tax credit and fill out an application.
Neighborhood Assistance Tax Credit
Delaware’s Neighborhood Assistance Tax Credit incentivizes businesses to invest in organizations and programs that serve low-income communities in Delaware. Businesses that invest in qualified entities can get a corporate income tax credit of 50% of their approved investment amount, up to $100,000 per year.
To qualify for the credit, you need to get approval from the Director of the Delaware State Housing Authority first. Apply for the credit here.
Business Finder’s Fee Tax Credit
The Business Finder’s Fee Tax Credit rewards Delaware companies for convincing one of their customers, suppliers, or service providers to relocate to Delaware. To qualify, the sponsoring business and the new business have to fill out a joint application, and the new business has to commit to creating at least three new full-time jobs in Delaware within eight months of relocating.
Both the sponsoring business and the new business each get a $500 credit for each new employee the new business hires.
Learn more about how to apply here.
One of the perks of doing business in Delaware? Low business tax rates. Here’s the employer’s guide to Delaware small business taxes.
Employer Tax Credit for Hiring Individuals with Disabilities
This tax credit rewards businesses for hiring referrals from the Division of Vocational Rehabilitation and the Division for the Visually Impaired. Qualified employers can receive up to $1,500 for each person referred from a designated state agency (DSA), hired, and employed for two consecutive years.
Learn how to apply here.
Related: Make sure you know which reasonable accommodations to provide to employees with disabilities.
Delaware city and county tax credits
Delaware counties and cities may have their own local business incentive programs worth checking out. Search for your municipality’s website here.
State financing for Delaware businesses
Delaware has a handful of amazing state-run funding opportunities, from flexible business loans to tailored grant programs. Read through Gusto’s guide to Delaware business grants and loans for a full list.
If you’re looking for more state-specific content, check out this guide to starting and running a business in Delaware, along with this breakdown on the advantages and disadvantages of forming an LLC in Delaware.
