HOUSE OF REPRESENTATIVES

153rd GENERAL ASSEMBLY

HOUSE SUBSTITUTE NO. 2

FOR

HOUSE BILL NO. 13

AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO PERSONAL INCOME TAX.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend § 1102, Title 30 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 1102. Imposition and rate of tax; separate tax on lump-sum distributions.

(a)(14) For taxable years beginning after December 31, 2013, and before January 1, 2026, the amount of tax shall be determined as follows:

2.2% of taxable income in excess of $2,000 but not in excess of $5,000;

3.9% of taxable income in excess of $5,000 but not in excess of $10,000;

4.8% of taxable income in excess of $10,000 but not in excess of $20,000;

5.2% of taxable income in excess of $20,000 but not in excess of $25,000;

5.55% of taxable income in excess of $25,000 but not in excess of $60,000; and

6.6% of taxable income in excess of $60,000.

(15) For taxable years beginning after December 31, 2025, the amount of tax shall be determined as follows:

2.1% of taxable income in excess of $2,000 but not in excess of $5,000;

3.8% of taxable income in excess of $5,000 but not in excess of $10,000;

4.7% of taxable income in excess of $10,000 but not in excess of $20,000;

5.1% of taxable income in excess of $20,000 but not in excess of $25,000;

5.45% of taxable income in excess of $25,000 but not in excess of $60,000;

6.6% of taxable income in excess of $60,000 but not in excess of $150,000;

6.75% of taxable income in excess of $150,000 but not in excess of $250,000;

6.85% of taxable income in excess of $250,000 but not in excess of $500,000; and

6.95% of taxable income in excess of $500,000.

Section 2. Amend § 1161, Title 30, by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 1161. Persons required to make returns of income.

An income tax return with respect to the tax imposed by this chapter shall be made by the following:

(1) Every resident individual who individual, if any of the following apply:

a. Is The individual is required to file a federal income tax return for the taxable year, or year.

b. Is The individual is a single person and has for the taxable year adjusted gross income as modified by § 1106 of this title of more than $9,378, or $9,387.

c. Is a married individual who is entitled to file a joint federal income tax return for the taxable year, and whose adjusted gross income for the taxable year as modified by § 1106 of this title, when combined with the adjusted gross income of the individual’s spouse, is more than $15,449. $15,632.

Section 3. This Act is effective for taxable years beginning after December 31, 2025.

Section 4. This Act is known as “The John Kowalko, Jr., Fairness in Taxation Act”.

SYNOPSIS

Like under House Bill No. 13 (HB 13) and House Substitute No. 1 for HB 13 (HS 1 for HB 13), this Act adjusts the existing personal income tax brackets and applicable tax rates. Under this Act, for taxable years beginning after December 31, 2025, taxable income between $60,000 and $150,000 will continue to be taxed at a rate of 6.6%, but taxable income above $150,000 will be taxed at higher rates.

The result of the changes under this Act will be that those with a taxable income of $188,500 or less will see no increase in personal income taxes, with 94% of Delaware taxpayers receiving an overall tax decrease.

Like HS 1 for HB 13, House Substitute No. 2 for HB 13 differs from HB 13 as follows:

• Creates additional tax brackets for taxable income not in excess of $60,000.

• Decreases the tax rate for all tax brackets for taxable income not in excess of $60,000.

• Creates 3 additional tax brackets for taxable income above $60,000 instead of 2.

• Names this Act the “The John Kowalko, Jr., Fairness in Taxation Act”.

In addition, House Substitute No. 2 for HB 13 differs from HS 1 for HB 13 as follows:

• Further decreases the tax rate for all tax brackets for taxable income not in excess of $60,000.

• Revises the tax brackets so that tax rates increase for taxable income above $150,000 instead of $125,000.

• Adjusts the personal income tax filing threshold to align with the revised tax brackets.

• Makes technical corrections to conform existing law to the standards of the Delaware Legislative Drafting Manual.