HB126 • 2025

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

Budget Labor Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Shupe
Last action: 2025-05-22
Official status: House Revenue & Finance 4/17/25
Effective date: Not listed

Plain English Breakdown

The bill does not define the term 'full-time hourly wage-paid employee,' leaving that definition open for future regulation or interpretation.

Delaware Overtime Income Tax Exemption

This bill removes state income tax on overtime pay for full-time hourly workers and requires employers to report how much overtime they paid.

What This Bill Does

Exempts wages earned from working more than 40 hours a week by full-time hourly employees from Delaware personal income tax for taxable years starting January 1, 2026, through December 31, 2027.
Requires employers to report the total amount of overtime paid and the number of employees who received it to the Division of Revenue.
Sets a deadline of January 31, 2026, for reporting data about overtime paid in calendar year 2025.
Mandates that reports on overtime for taxable years starting in 2026 be sent at the same time employers file their regular withholding returns.
Orders the Division of Revenue to share collected data with state officials including the Controller General, Director of the Office of Management and Budget, Secretary of the Department of Finance, and the Librarian of the Division of Legislative Services.

Who It Names or Affects

Full-time hourly wage-paid employees who work more than 40 hours in a week
Employers who pay wages subject to withholding under federal tax laws
The Delaware Division of Revenue

Terms To Know

Taxable year: A specific time period used for calculating taxes, such as a calendar year.
Overtime work: Work performed by an employee in excess of 40 hours in one week.

Limits and Unknowns

The tax exemption only applies to income earned between January 1, 2026, and December 31, 2027.
The bill does not define the exact rules for what counts as a 'full-time' employee.

Bill History

2025-05-22 Delaware General Assembly
Not Worked in Committee
2025-04-17 Delaware General Assembly
Introduced and Assigned to Revenue & Finance Committee in House

Official Summary Text

AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO PERSONAL INCOME TAX.
This Act exempts from State income tax any income received by a full-time hourly wage-paid employee for overtime work performed in excess of 40 hours in a week. This exemption applies for taxable years beginning on January 1, 2026, and ending before January 1, 2028.

This Act also requires each employer to provide information to the Division of Revenue about the total amount of overtime provided to full-time hourly wage-paid employees and the number of employees to whom overtime was paid in taxable years beginning January 1, 2025.

Current Bill Text

Read the full stored bill text

Legislation Document

SPONSOR:

Rep. Shupe & Sen. Buckson

Reps. Morris, Yearick; Sens. Hocker, Wilson

HOUSE OF REPRESENTATIVES

153rd GENERAL ASSEMBLY

HOUSE BILL NO. 126

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 § 1106, Title 30 of the Delaware Code by making deletions as shown by strike through and insertions as shown by underline as follows:

§ 1106. Modifications.

(b)

Subtractions. —

There shall be subtracted from federal adjusted gross income:

(13) For taxable years beginning January 1, 2026, and ending before January 1, 2028, amounts received by a full-time hourly wage-paid employee as compensation for work performed in excess of 40 hours in a week.

a. Each employer making payment of any wages or remuneration taxable under this chapter to a resident or nonresident individual whose wage or remuneration is subject to withholding under the Internal Revenue Code shall submit to the Division of Revenue (“Division”), on forms prescribed by the Division, all of the following:

1. For the tax year beginning January 1, 2025, the total amount received by full-time hourly wage-paid employees as compensation for work performed in excess of 40 hours in a week and the total number of employees for which it was paid. This data is due not later than January 31, 2026.

2. For taxable years beginning January 1, 2026, and ending before January 1, 2028, the total amount received by full-time hourly wage-paid employees as compensation for work performed in excess of 40 hours in a week and the total number of employees for which it was paid. This data is due at the same time as the employer’s withholding return under § 1154 of this title.

b. The Division shall report the data collected and compiled under paragraph (b)(13)a. of this section to all of the following not later than 30 days after the date the data is due to the Division:

1. The Controller General.

2. The Director of the Office of Management and Budget.

3. The Secretary of the Department of Finance.

4. The Director and the Librarian of the Division of Legislative Services.

c. The Division may adopt regulations to administer and enforce this paragraph (b)(13).

SYNOPSIS

This Act exempts from State income tax any income received by a full-time hourly wage-paid employee for overtime work performed in excess of 40 hours in a week. This exemption applies for taxable years beginning on January 1, 2026, and ending before January 1, 2028.

This Act also requires each employer to provide information to the Division of Revenue about the total amount of overtime provided to full-time hourly wage-paid employees and the number of employees to whom overtime was paid in taxable years beginning January 1, 2025.