Capital gains tax in Delaware (2026): selling a business, real estate or farm

Delaware's big-sale rule: a flat-feeling 6.6% on almost everything

Delaware does not give long-term gains a lower rate or a percentage deduction. The gain lands in Delaware taxable income alongside wages and interest, and the graduated table runs from 2.2% to 5.55% only on the first $60,000; everything at $60,000 or above is taxed at 6.6% (Delaware Division of Revenue personal income tax FAQ, 2026). For a seller with a seven-figure gain, that makes the Delaware layer close to a straight 6.6% of the gain.

A proposal to add 6.75% and 6.95% brackets (House Substitute 2 for HB 13, 2025) stalled in the House Revenue and Finance Committee, so the 2026 top rate stays at 6.6%. Watch new bills if your closing slips into a later year.

For context, federal long-term capital gains rates are 0%, 15% and 20%, with 20% applying above $613,700 of taxable income for joint filers in 2026 (Rev. Proc. 2025-32), plus the 3.8% net investment income tax for many sellers (IRC 1411).

Worked example: what a Delaware owner pays on a $1.95 million sale

In the first example a married couple sells the assets of their company. Because Delaware starts from federal adjusted gross income, the $150,000 of Section 1245 equipment recapture and the $1.8 million of goodwill gain are both taxed at the same 6.6% in Delaware; the character split only matters federally. The engine shows Delaware tax caused by the sale of $128,700, federal income tax of $409,775 and net investment income tax of $71,440, for an all-in effective rate of 31.3%.

How the price is split still matters for the federal layer, which is where most of the dollars are. See purchase price allocation and depreciation recapture, and the broader walk-through of capital gains tax on the sale of a business.

Nonresident sellers: REW-EST at the recorder's office

Delaware collects from out-of-state sellers before the deed can be recorded. Every nonresident individual, pass-through entity or corporation conveying Delaware real estate files Form REW-EST and pays an estimated tax of 6.6% of the gain (8.7% for C corporations), computed as net sales price minus adjusted basis, with basis already reduced by depreciation (Form REW-EST instructions, revised 07/31/24, in use for 2026). The payment is a credit against the Delaware nonresident return, not a separate tax.

In the second example, a Florida couple sells a beach rental. Florida has no income tax to credit, so the full Delaware layer of $60,720 stands, and the engine puts the total bill at $264,473. Their unrecaptured Section 1250 gain is capped at 25% federally but is ordinary income to Delaware at the same 6.6%. More on rentals: capital gains tax on rental property.

Installment sales and the REW-EST exception

Part 7 of REW-EST is one of the cleaner state rules for seller financing: if the seller reports the gain under the installment method, no payment is due at recording, and Delaware tax is paid as gain is recognized for federal purposes (REW-EST instructions, 2024 revision). That means a nonresident who carries a note is not forced to prepay 6.6% of gain they have not yet collected.

A Section 453 installment sale does not lower Delaware's 6.6% rate, because most of a large gain is above $60,000 in any year. The payoff is federal: spreading the gain can keep more of it in the 15% bracket and may reduce the 3.8% surtax. Protect the note with a first-position mortgage, a meaningful down payment and default terms, as covered in seller financing.

Realty transfer tax, including on entity sales

Delaware's realty transfer tax is a separate closing cost, and the seller usually pays half. The state rate is 3% of value, or 2.5% where the county or town has enacted the full 1.5% local tax, and the statute apportions the tax equally between grantor and grantee (30 Del. C. 5402, 2026), which is why sellers commonly budget about 2% of price.

• Selling the LLC instead of the land does not avoid it: a transfer of beneficial ownership in Delaware real estate through interests in a corporation, LLC, partnership or trust is taxed as if a deed were recorded (30 Del. C. 5401(8)).

The transfer tax is not an income tax, but it reduces the amount realized, so it slightly lowers the gain for federal and Delaware income tax purposes.

Retirees: the $12,500 exclusion that counts capital gains

Delaware lets each person age 60 or older exclude up to $12,500 of pension and "eligible retirement income," and the statute defines eligible retirement income to include dividends, capital gains, interest and net rental income (30 Del. C. 1106(b), 2026). On a large sale it is a small number, but for a couple who are both over 60 it removes up to $25,000 of gain from Delaware income, worth about $1,650 at 6.6% if no pension is already using it.

Delaware has no estate or inheritance tax, so the federal step-up at death is the main reason an older owner might hold an asset rather than sell it. See also capital gains on inherited property.

Delaware corporations, LLCs and the incorporation myth

Forming a company in Delaware does not move your personal capital gains to Delaware rules. Individuals are taxed where they live and, for real estate, where the property sits. A Texas owner of a Delaware LLC pays no Delaware income tax on a sale of out-of-state assets, and a California owner still owes California tax.

The Delaware franchise tax is an annual charge on Delaware corporations, and Delaware LLCs and partnerships pay a flat $400 annual tax (Delaware Division of Corporations, 2026); neither is levied on sale proceeds. A C corporation that sells Delaware real estate is the case where Delaware income tax reaches the entity, at the 8.7% rate shown on REW-EST.

Thinking about leaving before a sale of business stock? Delaware taxes residents on all income, so read moving states before a sale before you sign a letter of intent, then get the Big Sale Tax Analysis to compare cash, installment and exchange paths side by side.

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Frequently asked questions