Only one city in Delaware charges a local income tax: Wilmington. The Delaware city income tax is a flat 1.25 percent on earned income, and it applies if you live in Wilmington, work there as a non-resident, or run a business inside city limits. Workers in Newark, Dover, and every other Delaware municipality owe no equivalent local wage tax.
Who Owes the Wilmington Wage Tax
Your obligation depends on where you live and where you actually do the work.
If you live inside Wilmington city limits, you owe 1.25 percent on all earned income no matter where the job is located. A Wilmington resident who commutes to an office in Newark or Philadelphia still pays the city tax on those wages.
If you live outside Wilmington and physically perform work within the city, you owe the tax only on the income earned inside the city. Your employer’s mailing address doesn’t decide this. What matters is where you show up and do the work.
Employers with workers in Wilmington are expected to withhold the city wage tax from paychecks. If your employer doesn’t withhold, the obligation still falls on you. You would report and pay directly to the city’s Earned Income Tax Division.
What Counts as Taxable Income
The tax hits money you earn through work, not passive returns on investments.
Employee wages are fully covered: salaries, hourly pay, commissions, bonuses, incentive pay, and vacation or holiday pay. Net business profits are covered too. If you operate a business or practice a profession in the city, the tax applies to gross revenue minus ordinary business expenses. Residents pay on total net profits; non-residents pay only on the share attributable to work performed inside Wilmington.
Freelancers and 1099 workers who perform services within city limits owe the net profits tax, filed on Form WCWT-6.1City of Wilmington. City Wage & Net Profits Taxes No employer is withholding for you, so the full responsibility to calculate and pay sits with you. Business owners should remember that owner draws are not a deductible expense. The city taxes the profit the business generated, not what you chose to take out.
What’s Exempt
Because this is an earned income tax, income that doesn’t come from work is left alone. Interest on savings, stock dividends, capital gains, Social Security benefits, and distributions from pensions or retirement accounts are all excluded. The exemption follows the type of income, not the taxpayer. A retiree who picks up part-time work in Wilmington owes the 1.25 percent on those wages, while the pension stays untouched.
The Rate
Wilmington’s rate is a flat 1.25 percent on both wages and business net profits. There are no brackets and no income floor; the first dollar is taxed at the same rate as the last. The rate is uniform across residents and non-residents, though non-residents apply it only to their Wilmington-earned portion.
Filing and Paying
If your employer withholds correctly all year, most employees have little to do beyond checking the W-2. Verify the amount withheld against what you actually owe. Errors happen, and if you were under-withheld or your employer skipped the withholding entirely, you’ll need to file a return and pay the difference.
Self-employed workers and business owners file Form WCWT-6. Pull the net profit figure from Schedule C of your federal Form 1040, then apply 1.25 percent to that amount, or to the Wilmington-attributable share if you’re a non-resident. Forms are available from the City of Wilmington Department of Finance.
You can mail a paper return with a check or money order to the Department of Finance, or file electronically through the city’s Taxpayer Self Service portal. The portal requires an account, and first-time filers may need to request an Earned Income Taxpayer Account through a separate application before filing.1City of Wilmington. City Wage & Net Profits Taxes After submitting online, keep the confirmation receipt the system generates.
Refunds When You Were Over-Withheld
Non-residents routinely leave money with the city they didn’t owe. If you work for a Wilmington-based employer but spend some of your time working at locations outside the city, your employer may have withheld on your entire paycheck even though Wilmington can only tax the portion earned inside its borders. You can claim the excess back.
The city provides Form WCWT-5 (Application for Refund) for this.1City of Wilmington. City Wage & Net Profits Taxes You’ll need to document which days you worked outside Wilmington and the share of income tied to that time. If you travel to client sites, work from home in another state, or split time between a Wilmington office and a suburban location, it’s worth checking whether you’ve been over-withheld.
Remote and Hybrid Workers
The tax is based on where you physically perform the work. Days you spend working from home in Pennsylvania, Maryland, or anywhere else outside the city shouldn’t be subject to Wilmington’s wage tax.
The practical problem is that many employers withhold as though the employee is in Wilmington every day. If that happens, Form WCWT-5 is the mechanism to reclaim the tax on days worked elsewhere. Keep a contemporaneous log of where you work each day. Reconstructing it from memory months later is hard, and the city may ask for supporting documentation such as building access records, calendar entries, or employer verification.
Cross-Border Workers and Credits
Wilmington sits at the junction of Delaware, Pennsylvania, and New Jersey, and thousands of workers cross state lines daily. Delaware has no formal reciprocity agreement with other states covering municipal income tax, so Wilmington’s levy stands on its own regardless of what your home state or city charges.2Keystone Collections Group. I Work Out of State and Pay Income Tax to a Municipality in That Other State – Am I Eligible for a Credit Against My Pennsylvania Resident Local Tax Liability?
Your home jurisdiction may still provide relief. Pennsylvania residents can apply the Wilmington tax paid as a credit against Pennsylvania local earned income tax liability. The credit applies only to income taxed in both places and cannot exceed the PA local tax owed. Courts have held that Philadelphia must give a credit for Wilmington tax paid, preventing full double taxation at the local level for Philadelphia residents who work in Wilmington. New Jersey residents who work in Wilmington may qualify for a credit on their New Jersey state return for taxes paid to other jurisdictions, though the mechanics differ because New Jersey doesn’t impose local earned income taxes the way Pennsylvania does. The specifics depend on your home state’s tax code, so check your state return instructions carefully.
Penalties for Late Filing or Non-Payment
Wilmington charges both penalties and interest on late returns. Under the city code, late submissions trigger a monthly penalty, and unpaid balances accrue interest that compounds the longer you wait. Persistent failure to file can lead to legal action, court judgments, or fines. If you’re behind, contacting the Earned Income Tax Division is almost always better than waiting to be found.
A Note for Employers: the Head Tax
If you’re running a business in the city rather than just working there, Wilmington imposes a separate “head tax” on employers. Any business required to hold a city business license pays $15 per month for each employee beyond the first five who work within the city.3City of Wilmington. Incentives Offered by the City of Wilmington Part-time hours are totaled for the month and divided by 173 to produce a full-time-equivalent count. This cost sits with the employer, not the workers, and it’s separate from the 1.25 percent wage tax.