Delaware Capital Gains Tax on Real Estate

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Delaware have a capital gains tax?

Delaware has no separate capital gains tax, but it does tax capital gains. The gain on a Delaware rental or apartment building is added to your other income and taxed under the regular personal income tax schedule in 30 Del. C. section 1102, which tops out at 6.6% on taxable income over $60,000.

Short-term and long-term gains are taxed the same way in Delaware. The one-year holding period matters for your federal return, where long-term gain gets the lower 0%, 15% and 20% rates, but not for the state.

Delaware income tax brackets for 2026

Delaware uses one rate schedule for single filers and married couples, and it has not changed since 2014. A 2025 proposal, House Substitute 2 for House Bill 13, would have added higher brackets above $150,000 starting with 2026, but it never left the House Revenue and Finance Committee, so the table below still applies for 2026.

• Because the top bracket starts at $60,000, a seller with ordinary wages or rental income already in that bracket pays a flat 6.6% on every dollar of gain.
• Nonresidents use the same rate schedule on their Delaware return, so a large gain on a Delaware building is taxed at or near 6.6% wherever the owner lives.

How Delaware and federal tax stack on a sale

You owe both, figured separately. For 2026, Revenue Procedure 2025-32 sets the federal 20% long-term capital gains rate to start at $613,700 of taxable income on a joint return and $545,500 for a single filer. The part of your gain equal to depreciation taken on the building is unrecaptured Section 1250 gain, taxed at your ordinary rate up to a 25% maximum. The 3.8% net investment income tax applies once modified AGI passes $250,000 joint or $200,000 single.

Delaware then taxes the whole gain at its brackets. State income tax is deductible federally only as a capped itemized deduction, so on a sale of this size the 6.6% is close to a pure added cost. A seller in the top federal brackets pays roughly 20% plus 3.8% plus 6.6% on the capital gain part, and up to 25% plus 3.8% plus 6.6% on the depreciation part.

Delaware estimated tax when a nonresident sells

A nonresident who sells Delaware real estate must settle an estimated tax payment before the deed can be recorded. Under 30 Del. C. section 1126(b), the seller files a declaration with the county Recorder of Deeds and pays the highest marginal rate, 6.6%, on the estimated gain. The money comes out of the net proceeds at settlement, and the Recorder will not record the deed without the form.

Gain from Delaware real property is Delaware-source income under section 1124, so the payment is a credit toward the nonresident return you file for the year, not a final tax. If the 6.6% estimate is more than you owe, you get the difference back when you file.

The Division of Revenue’s Form REW-EST, the declaration of estimated income tax for real estate transfers, handles the filing. Its instructions say a C corporation seller pays 8.7% of the gain, and all other sellers, including individuals, partnerships, S corporations and LLCs, pay 6.6%. A seller reporting the gain on the installment method pays nothing at recording and reports the gain as it is recognized.

• The statute offers an alternative form that applies 6.6% to the amount realized less the balance on recorded liens, which can be lower when the loan is large.
• A seller can instead certify that the sale is exempt from gain recognition, or that part of the gain is excludable, with a citation to the Internal Revenue Code. This is how a 1031 exchange is reported.
• Delaware residents check a box on the form and pay nothing at recording.

The realty transfer tax on a Delaware sale

Delaware’s realty transfer tax is steep, and it often costs a seller more at closing than the income tax estimate. Under 30 Del. C. section 5402, the state rate is 3%, falling to 2.5% where the county or town has adopted the full 1.5% local tax, for a combined 4%.

The statute splits the tax equally between seller and buyer, but section 5412 puts the whole amount on the seller if the contract says nothing, so spell out the split. On a $2,000,000 building, the full 4% is $80,000 and a 50/50 split puts $40,000 on each side.

Selling an LLC that owns the building does not avoid the tax. Section 5401(8) taxes a change in beneficial ownership through transfers of entity interests as if a deed had been recorded, with an exception where the same owners keep at least 80% of the interest before and after. The transfer tax you pay is a selling expense that reduces your gain.

Depreciation recapture in Delaware

Delaware has no special recapture rate. The depreciation portion of your gain is taxed at the same 6.6% as the rest, so splitting the gain between recapture and capital gain changes the federal bill but not the Delaware one.

One new rule can change the size of the gain. Section 1106(d) of the Delaware code decouples from the 100% bonus depreciation in section 70301 of the 2025 federal law (P.L. 119-21) for property placed in service from 2026 through 2030. If you bought a building in 2026 and took bonus depreciation on cost-segregated components, your Delaware basis will be higher than your federal basis, and your Delaware gain smaller, when you sell. Keep a separate Delaware depreciation schedule.

Worked example: selling a $2M apartment building in Delaware

A married couple living in Wilmington sells a 20-unit building in New Castle County for $2,000,000. Their selling costs are $110,000, including a $40,000 half share of the 4% transfer tax. They bought the building for $1,100,000 and have claimed $350,000 of depreciation, so the adjusted basis is $750,000 and the gain is $1,140,000: $350,000 of unrecaptured Section 1250 gain and $790,000 of other long-term gain. They have $250,000 of other taxable income and an $850,000 loan.

Federal tax: the $350,000 of Section 1250 gain stacks on the $250,000 of other income. The first $153,550, up to the top of the 24% bracket at $403,550, is taxed at 24%, and the remaining $196,450 at the 25% maximum, for $85,965. The $790,000 of capital gain starts at $600,000 of income, so $13,700 is taxed at 15% and $776,300 at 20%, or $157,315. The 3.8% NIIT on $1,140,000 is $43,320. Federal total: $286,600.

Delaware tax: their other income already fills the brackets below $60,000, so the whole $1,140,000 gain is taxed at 6.6%, or $75,240. As residents they pay nothing at recording and settle it on their return.

Combined, the couple owes $361,840 in income tax, about 31.7% of the gain. After the $850,000 loan payoff they receive $1,040,000 at closing, or about $678,160 after income tax.

The same sale by an out-of-state owner

If the couple lived in Pennsylvania, the closing attorney would collect a 6.6% estimate on the $1,140,000 gain, $75,240, and send it to the Recorder with the deed. That payment counts toward their Delaware nonresident return.

Their Delaware bill would be about the same, since the gain is Delaware-source and sits in the 6.6% bracket either way. Their home state may then tax the gain too and give a credit for the Delaware tax, so ask a CPA in your own state how the credit works before you count on it.

How a 1031 exchange changes the Delaware tax

A 1031 exchange defers the Delaware income tax along with the federal tax. Delaware’s taxable income starts from federal adjusted gross income under section 1105, and gain deferred under Section 1031 is never in federal AGI. In the example, reinvesting the full $1,040,000 of cash into a replacement priced at $1,890,000 or more would push all $361,840 into the future.

Delaware has no clawback rule like California’s or Oregon’s, so the replacement can be in Maryland, Pennsylvania or anywhere else in the country with no annual Delaware filing. A nonresident who exchanges uses the exempt-gain option on the recording form, so only any taxable boot carries the 6.6% estimate.

An exchange does not touch the realty transfer tax. You pay your share on the sale, and if the replacement is also in Delaware you pay the buyer’s share on that deed too. Our page on the 1031 exchange in Delaware walks through the filing and a worked example.

The capital gains tax calculator and the depreciation recapture calculator run the federal side with your own numbers.

Ways Delaware sellers reduce the tax

With a flat 6.6% on most of the gain, the levers are timing, basis and structure.

• A full 1031 exchange, which keeps the gain out of federal and Delaware income.
• An installment sale, which spreads gain over several years; it mostly helps the federal brackets, since the Delaware rate is 6.6% at any income above $60,000.
• Negotiating the transfer tax split in the contract, since the default puts all 4% on the seller.
• Documenting every capital improvement, since each dollar of basis cuts gain taxed at up to about 35% combined.
• Holding until death, when heirs receive a stepped-up basis.

Selling a Delaware apartment building

Skyline buys apartment buildings with five or more units in Delaware, from Wilmington and Newark to Dover and the Sussex County beach towns. We buy directly, close on your timeline, and can work inside 1031 deadlines. We can agree the transfer tax split up front and set a closing date that gives a nonresident seller time to prepare the recording form.

For the carrying costs a buyer will look at, see our page on the property tax rate in Delaware, and for the tenant rules that come with the building, Delaware landlord-tenant law for apartment owners.