StructuredSales.org
StructuredSales.org
Search for "Delaware" and "selling" and you will mostly find the wrong transaction. A Delaware statutory trust is a title-holding trust used around the country as 1031 replacement property. The building is often in Texas or Arizona. The investor often lives in New Jersey. None of that is a Delaware income-tax problem. This page is the other Delaware: a person who lives here, or who is selling land, a poultry operation, a rental, or a business that actually operates here.
If you are comparing a statutory trust with some other deferral product, read the DST and deferred-sales-trust comparison and stop. A deferred sales trust is not Delaware's trust statute, and neither one is an installment sale under IRC §453. The rest of this guide assumes you are selling something Delaware can tax.
Delaware taxes capital gain as ordinary income. For years beginning after December 31, 2013, 30 Del. C. § 1102 imposes 0% on the first $2,000 of taxable income, then 2.2% through $5,000, 3.9% through $10,000, 4.8% through $20,000, 5.2% through $25,000, 5.55% through $60,000, and 6.6% on taxable income over $60,000. The thresholds are the same for every filing status. House Bill 13 in 2025 would have cut some rates under $60,000 and added 6.75%, 6.85%, and 6.95% brackets above $150,000 for years beginning after 2025. It did not pass. For a 2026 sale the top rate is still 6.6%, and it starts at a low number.
A seller whose other income is already past $60,000 pays 6.6% on every additional dollar of gain. Spreading the gain does not open a new bracket if each year's slice stays above $60,000. It changes when the tax is paid. The percentage does not.
The Division of Revenue FAQ lets a person 60 or older exclude up to $12,500 of pension and eligible retirement income, and capital gains can fill that cap along with dividends, interest, rent, and qualified plans. The bucket is $12,500 per person, shared with a pension you may already receive. Under 60 the pension exclusion on the same page is $2,000. It is not a sale exclusion. Delaware does not tax Social Security. That affects other income. It does not shrink the gain.
A full-year resident is taxed on the gain no matter where the buyer lives. Federal adjusted gross income is the starting point, with the modifications in § 1106, so Form 6252 gain is Delaware income in the year federal law says it is income. Electing out of the installment method federally elects you out for Delaware. There is no separate Delaware installment statute that keeps a deferral alive after you have elected out.
Nonresidents are taxed on Delaware-source income. The Department of Finance tax-preference report describes that as pay for work performed here and income from owning or selling real or tangible property in Delaware, including business, farm, partnership, and rental income. Interest and dividends are excluded even when they trace back to a Delaware job. A nonresident who sells a house in Rehoboth, a rental in Newark, or equipment in a New Castle County plant has Delaware-source gain, and installment payments on that gain stay Delaware-source after the seller goes home to Pennsylvania or Maryland.
Selling stock in a Delaware corporation does not, by itself, create Delaware income tax for a nonresident. Stock is usually intangible, taxed where the shareholder lives. Delaware can still reach an asset sale, or apportionable business income of an operation in the state. The caption on the agreement is not the tax answer. A seller who lives in Delaware and owns property in New Jersey, or the reverse, can owe both states. New Jersey's top rate reaches 10.75%. The credit is computed on both returns.
When a nonresident records a deed, Delaware collects estimated income tax at the Recorder of Deeds. The instructions to Form REW-EST, the 2025 revision still stating 6.6%, set that estimate at 6.6% of the gain for individuals and pass-through sellers, and at a higher percentage for C corporations. Part 7 is the installment box. If the transferor reports under the installment method, no estimated income-tax payment is due at recording, and the tax is paid as the gain is recognized for federal purposes. That is one of the few state mechanics that tracks §453 at the courthouse.
The realty transfer tax is due when the deed is recorded. The installment box does not postpone it, and this page does not quote a rate because local add-ons differ. A structured sale often has the buyer pay in full at closing, with an assignment company behind the seller's payments. That is not a purchase-money note the seller still holds. Whether REW-EST's installment box fits that closing is a question for Delaware counsel. Residents pay through estimates and the resident return.
A married couple in Sussex County is selling the real estate and goodwill of an agricultural-services business they have run for decades. Poultry houses, a shop, and a customer list are in the price. Depreciation recapture on the houses and equipment is ordinary income in the year of sale and is left out. What remains is $1.1 million of long-term capital gain. Other Delaware taxable income is already over $60,000.
Assumptions. Joint Delaware residents. The entire $1.1 million is long-term capital gain taxed at 6.6% because other taxable income is already over $60,000, in the lump-sum year and in each installment year. Federal taxable income before the gain is $150,000, above the 2026 joint 0% long-term threshold of $98,900. Other MAGI is already over $250,000, so the 3.8% net investment income tax applies to the full gain either way. The installment case recognizes $220,000 a year for five years and ignores interest. The $12,500 age-60 bucket is not applied. No transfer tax. Estimates only.
| Lump sum | Five years, total | |
|---|---|---|
| Long-term gain recognized | $1,100,000 | $1,100,000 |
| Estimated Delaware tax at 6.6% | $72,600 | $72,600 |
| Estimated federal long-term capital gains tax | $196,815 | $165,000 |
| Estimated net investment income tax | $41,800 | $41,800 |
| Combined estimate | $311,215 | $279,400 |
Delaware tax is $72,600 in both columns. Six-point-six percent of $1.1 million does not care how you slice a gain that never falls back through $60,000. Five slices of $220,000 are each still in the top bracket. Federal long-term tax falls from $196,815 to $165,000. In the lump-sum year, $463,700 of the gain is at 15% and $636,300 is at 20%. Each installment year adds $220,000 to $150,000 of other taxable income and stays under the $613,700 threshold, so the gain is taxed at 15%. The 3.8% tax is $41,800 either way. The combined difference, about $31,800, is federal. Calling it a Delaware savings would mislabel it.
Some Delaware sellers still use a structured installment sale because the federal brackets move, an annuity can fund the payments, and the 6.6% tax is paid as the payments arrive. The state rate does not shrink. If obligations outstanding at year-end exceed $5 million of face amount on a sale priced over $150,000, and the property is not used in the farming business, the §453A interest charge belongs in the model. A mixed shop-and-goodwill sale may only partly qualify for the farm exception. Allocation is in the §453 overview and the business-sale guide. Section 1245 recapture is not spread.
Sellers who start with a 1031 and cannot find qualifying replacement property are in a taxable sale, and Delaware follows that federal recognition. The installment-versus-1031 page is the fork. Have a Delaware CPA read the agreement, residency, and any REW-EST filing. Often the state rate is 6.6% either way, and the decision left is federal.
No. A Delaware statutory trust is a form of trust organized under Delaware law and widely used, nationwide, as a replacement-property vehicle in a 1031 exchange. The property inside the trust is often not in Delaware, and the investor often does not live in Delaware. Selling a farm, a rental, or a company that actually sits in Delaware is an income-tax event under Title 30. The two ideas share a word and almost nothing else. A deferred sales trust is a third, different product.
Delaware taxes capital gains as ordinary income. For taxable years that are still under the brackets enacted for years beginning after 2013, the top rate is 6.6% on taxable income over $60,000. Rates below that line run from 0% on the first $2,000 up through 5.55% between $25,000 and $60,000. A 2025 bill to add brackets above 6.6% did not become law. There is no preferential long-term rate.
On a sale large enough to plan around, usually not. The 6.6% bracket starts at $60,000 of taxable income. An annual slice of a business or real estate gain, added to ordinary income, is still over that line for most sellers. Installment reporting changes the year Delaware is paid. The rate on a large gain stays 6.6%. The federal 15% and 20% long-term brackets are where spreading changes the tax, not the Delaware percentage.
Not merely because the charter is in Delaware. Nonresidents are taxed on Delaware-source income: real property, tangible property, and Delaware business or farm activity. A nonresident's stock sale is often taxed where the shareholder lives. An asset sale, or apportionable business income, can still be Delaware income.
A nonresident's deed generally triggers estimated income tax of 6.6% of the gain on Form REW-EST. If the seller uses the installment method, the instructions say no estimate is due at recording and the tax is paid as federal law recognizes the gain. That does not defer the realty transfer tax. A structured sale, with the buyer paying in full at closing, should be walked through with Delaware counsel before anyone checks the installment box.
Last reviewed: October 22, 2026.
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