Do expats from Delaware still need to pay state taxes?

Do expats from Delaware still need to pay state taxes?

If you’re an expat from Delaware, you might wonder if you still need to pay state taxes. Delaware has specific tax rules that can impact you, even if you live and earn money abroad. 

Understanding these rules is important to avoid surprises and ensure you follow the law.

In this article, we’ll break down Delaware’s tax policies for expats, explain the difference between domicile and residency, and outline what you need to know to manage your tax obligations effectively


Delaware does not impose state income tax on income earned outside the state, so if you’re an expat with foreign-earned income, you typically won’t owe Delaware state income taxes.

However, Delaware taxes are based on domicile, meaning you may still have tax obligations if Delaware is considered your permanent home.

To maintain your Delaware domicile without paying state income taxes on foreign income, your income must be entirely from non-Delaware sources, you must maintain significant ties to Delaware, and proper documentation.

No income tax for non-residents on most income

Delaware is one of the few states that does not impose income tax on income earned outside the state. This means that if you are an expat and your income is solely from foreign sources, you typically won’t owe Delaware state income taxes on that income. This exemption includes various types of income earned abroad, such as wages from a job outside the U.S., income from foreign investments, and other earnings not connected to Delaware.

Domicile vs. Residency

“Domicile” and “residency” are two distinct concepts in tax law. Your domicile is your permanent home, where you intend to return to and remain, even if you temporarily live elsewhere. Residency, on the other hand, refers to the place where you currently live. Delaware taxes are based on domicile, meaning if Delaware is your domicile, you may still be subject to state taxes regardless of where you reside.

To be considered domiciled in Delaware, you must maintain significant ties to the state, such as owning property, having a Delaware driver’s license, or being registered to vote in Delaware. However, although certain conditions are met, Delaware allows individuals to maintain their domicile in the state without paying state income tax on foreign-earned income.

Maintaining Delaware domicile

For expats wishing to maintain their Delaware domicile without incurring state income taxes on their foreign income, certain criteria must be met:

  • No income sourced from Delaware: Your income must be entirely from non-Delaware sources.
  • Maintaining Delaware ties: You should maintain significant ties to Delaware, such as property ownership or maintaining a Delaware driver’s license.
  • Documentation: Proper documentation and records proving your income sources and ties to Delaware are crucial.

What constitutes Delaware-sourced income?

Understanding what constitutes Delaware-sourced income is essential for nonresidents and part-year residents to accurately determine your tax obligations.

Delaware-sourced income refers to any income derived from activities or assets located within the state. 

Here are some key categories to consider:

  • Wages and Salaries: Money earned for services performed in Delaware.
  • Business Income: Income from business activities conducted in Delaware.
  • Real Estate: Rental income from property located in Delaware.
  • Capital Gains: Profits from the sale of real estate or tangible property in Delaware.
  • Dividends and Interest: Dividends from Delaware-based companies and interest earned from Delaware financial institutions.
  • Pensions and Retirement Plans: Retirement income from Delaware institutions or for services performed in the state.

Tax benefits and exemptions for expats from Delaware

Living abroad as an expat comes with various tax benefits and exemptions that can help reduce your overall tax burden.

Here are some of the key tax advantages available:

Foreign Earned Income Exclusion (FEIE)

The FEIE allows U.S. taxpayers living abroad to exclude a certain amount of their foreign-earned income from U.S. federal income tax. 

For the tax year 2024, this exclusion amount is up to $126,500.

To qualify, you must pass either:

  • Bona Fide Residency Test: You qualify if you are a resident of a foreign country for an uninterrupted period that includes an entire tax year.
  • Physical Presence Test: You qualify if you are physically present in a foreign country for at least 330 full days during a 12-month period.

FEIE Guide

Foreign Tax Credit (FTC)

The FTC helps you avoid double taxation by allowing you to take a credit for foreign taxes paid on income that is also subject to U.S. federal tax. 

This credit can significantly reduce your U.S. tax liability, especially if you reside in a country with high tax rates.

FTC Guide

Foreign Housing Exclusion (FHE)

The FHE allows you to exclude certain housing expenses from your federal and state taxable income, including rent, utilities (excluding telephone), and other reasonable expenses related to housing abroad.

The amount you can exclude is limited to a base amount plus housing expenses exceeding 16% of the FEIE limit.

FHE Guide