Does Delaware Tax Social Security and Retirement Income?

Delaware does not tax Social Security

Delaware law subtracts from federal adjusted gross income all Social Security benefits paid by the United States, and all payments under the Railroad Retirement Act, to the extent they were included in it. The subtraction has no income limit and no age condition, and it is separate from the $12,500 exclusion for other retirement income, so benefits do not use up any of that room. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

On the return, the taxable amount of benefits included in federal adjusted gross income on line 1 is entered on Form PIT-RES, line 8a. The instructions put it plainly: Social Security and Railroad Retirement benefits are not taxable in Delaware and should not be included in taxable income. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Up to $12,500 per person is excluded from age 60, and $2,000 before that

For taxable years through 2026, a person who is 60 or older subtracts up to $12,500 of amounts received as pensions from employers, the United States, the State of Delaware or its subdivisions, or as eligible retirement income. A person under 60 subtracts up to $2,000 of pension income. The statute treats private, federal, state and local government pensions alike, and the amounts are fixed in the law, not indexed to inflation. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

Each taxpayer gets one exclusion, however many pensions or accounts they draw on, and spouses who each have qualifying income get one each. Age is measured on December 31 of the tax year. The exclusion is claimed on Form PIT-RES, line 6, and the Form 1099-R statements are attached. A distribution coded as early in box 7 of Form 1099-R (code 1), or one on which the federal early withdrawal penalty was assessed, does not qualify. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Military pensions are treated more generously before 60. For taxable years 2022 through 2026, a person under 60 subtracts the greater of $2,000 of ordinary pension income or $12,500 of United States military pension, which the statute defines to include service in the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, National Guard and the commissioned corps of NOAA and the Public Health Service. From 60, military retired pay falls under the same $12,500 limit as other retirement income. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

The military limit rises to $15,000 for the 2027 tax year, $20,000 for 2028 and $25,000 for 2029 and later, at any age. From 2027 a retiree who is 60 or older takes the greater of the ordinary $12,500 exclusion or the military pension amount, not both, and on a joint return the limit applies separately to each spouse who receives a military pension. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

The same 2026 amendment added a domicile condition. As the statute now reads, a person who is 60 or older is eligible for the subtraction only if they have been legally domiciled in Delaware for at least three years, or at least five years if they become domiciled on or after January 1, 2027. The condition is written to apply to the whole pension and eligible retirement income subtraction for a person 60 or older, not only to military pensions, and it does not apply to the amounts a person under 60 can subtract. For this purpose the statute treats a person as legally domiciled in Delaware if they are a resident individual as the income tax law defines it. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

IRA and 401(k) withdrawals share the $12,500 exclusion from age 60

Eligible retirement income is defined to include distributions from qualified retirement plans under section 4974 of the Internal Revenue Code, which covers IRAs, from 401(k) arrangements and from government section 457 plans. It counts only for a person who is 60 or older, and it shares the one $12,500 limit with pension and investment income. The single retiree in our examples has $45,000 of pension, IRA and interest income, excludes $12,500 and is taxed on the rest. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

Under 60, the $2,000 exclusion is for pension income, so an IRA withdrawal at 59½ gets no Delaware exclusion until the year the owner is 60 on December 31. Withdrawals above the exclusion are ordinary income, taxed at up to 6.6%. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

The 2025 instructions, the latest published, do not mention Roth conversions. A conversion reaches the Delaware return through federal adjusted gross income on line 1, and the only relief on offer is the same $12,500 per person, which most retirees with a pension or required distributions have already used. A $50,000 conversion on top of other income therefore adds up to $3,300 of Delaware tax at the 6.6% rate. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and gains count toward the exclusion at 60, then are taxed as ordinary income

Delaware is unusual in letting investment income into its retirement exclusion. For a person 60 or older, eligible retirement income includes dividends, capital gains net of capital losses, interest and net rental income from real property. The instructions give the example of a couple, both over 60, where one spouse has a $10,000 pension and they jointly earn $9,000 of interest, dividends and gains: the first spouse excludes $12,500 and the second, with no pension at all, excludes their $4,500 half of the investment income. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Beyond the exclusion there is no lower rate for long-term gains or qualified dividends; they are taxed with everything else under the one rate table. A $40,000 long-term gain realized by someone already above $60,000 of taxable income costs $2,640. (Delaware Code, Title 30, Chapter 11, Subchapter I: § 1102 (rates of tax), § 1103 (resident individual defined))

Interest on obligations of the United States is subtracted on line 5, but not interest on obligations where the United States is not the primary obligor or that are not backed by its full faith and credit. Interest on bonds of other states and their localities is added back on line 2, while Delaware’s own state and local bonds stay exempt, including the Delaware share of a municipal bond fund when the fund reports it in writing. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

The first $2,000 of taxable income is untaxed. Above that the rates are 2.2% to $5,000, 3.9% to $10,000, 4.8% to $20,000, 5.2% to $25,000, 5.55% to $60,000 and 6.6% on everything over $60,000. This table has applied since 2014, and it is the same for single filers and married couples: the thresholds are not doubled on a joint return. (Delaware Code, Title 30, Chapter 11, Subchapter I: § 1102 (rates of tax), § 1103 (resident individual defined))

For 2026 the standard deduction is $3,250 for a single filer or a spouse filing separately and $6,500 on a joint return, with an additional $2,500 for each taxpayer or spouse who is 65 or older or blind. The additional amount is lost by anyone who itemizes. Personal credits of $110 per person, and a further $110 for each person 60 or older, come off the tax. (Delaware Division of Revenue, 2026 Declaration of Estimated Income Tax for Individuals: Form PIT-EST instructions and tax computation schedule)

Married couples can file jointly (Filing Status 2), on separate forms (3), or separately on one combined return (4), which the instructions describe as two separate returns combined on the same form for convenience. Each spouse reports their own income and half of the income from jointly titled accounts, and each column runs through the rate table from the bottom. The instructions say separate returns will generally be advantageous when both spouses have Delaware adjusted gross income above $9,400, and both spouses must make the same choice between the standard deduction and itemizing. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Our examples price each couple both ways and show the lower result, which is Filing Status 4 in both cases, with investment income split evenly. The first couple owes $1,990 that way against $2,144 on a joint return, and the couple with the larger portfolio owes $9,638 against $10,655. In the first couple the lower-income spouse’s tax of $135 is smaller than their $220 of credits; the unused $85 cannot be moved to the other column. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Below $60,000 of taxable income the tax is read from a table in $50 bands, which gives the tax on the midpoint of each band; from $60,000 the schedule is $2,943.50 plus 6.6% of the excess. Our figures follow that method using the 2025 table, the latest published. The 2026 table had not been released when this page was reviewed, and the rates behind it are unchanged. (Delaware Division of Revenue, 2025 State Income Tax Table and Tax Schedule)

The examples assume a household that has been domiciled in Delaware for at least three years. Separately, state law lets any municipality with more than 50,000 residents tax the earned income of its residents, and income earned in the city by non-residents, at up to 1.25%. That is a tax on earnings, not part of the state return. (Delaware Code, Title 22, Chapter 9: Municipal User Tax (§§ 901 to 903, tax on earned income, 1.25% limit))

Two things change in the year a person is 60 on December 31: the exclusion rises from $2,000 of pension income to $12,500 of pension, retirement account and investment income, and a second $110 personal credit is added. A couple who are both 60 have $440 of credits. (Delaware Code, Title 30, Chapter 11, Subchapter II: § 1106 (modifications, including the pension and Social Security subtractions), § 1108 (standard deduction), § 1110 (personal credits))

At 65 the standard deduction grows by $2,500 per person, so a couple who are both 65 deduct $11,500 on a joint return, or $5,750 each when filing separately on a combined return. (Delaware Division of Revenue, 2026 Declaration of Estimated Income Tax for Individuals: Form PIT-EST instructions and tax computation schedule)

A further $2,000 exclusion on line 11 is aimed at people of modest means: a person who is 60 or older or totally disabled, with earned income under $2,500 and Delaware adjusted gross income of $10,000 or less. On a joint return it is $4,000 when both spouses qualify, earned income is under $5,000 and adjusted gross income is $20,000 or less. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Homeowners 65 or older can receive the Senior School Property Tax Credit, worth half of the school property tax on a primary residence up to $500 a year. It is described under property tax below. (Delaware Department of Finance: Senior School Property Tax Relief)

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Delaware's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

As a comparative measure, Tax Foundation figures drawn from Census data put Delaware property taxes at 0.54% of owner-occupied home value in 2024, which ranks 39th highest among the states. Its county table shows the spread: 0.31% in Sussex County, 0.43% in Kent County and 0.72% in New Castle County. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

State law requires property to be assessed at its fair market value as of the county’s most recent reassessment base year, and requires each county to reassess all real property at least once every five years, counted from the date its board of assessment certifies a completed general reassessment. (Delaware Code, Title 9, Chapter 83, Subchapter I: § 8306 (standard of assessment; frequency of reassessment), § 8345 (quality-control mechanism, New Castle County))

Sussex County’s reassessment, carried out under a court settlement, set values at fair market value as of June 30, 2023, and the county finalized its 2025 property tax values on June 30, 2025. The county says it was revenue neutral, collecting what it would have collected the year before apart from growth. (Sussex County, Delaware: Tax and Reassessment FAQ)

In New Castle County a temporary law lets the Office of Finance review and correct values from the county’s general reassessment where there was a clerical or factual mistake, or where a non-residential parcel’s new value fell, rose far less than the county median, or sits well below a recent sale price. Under it, corrections had to be made by September 30, 2026, the county must mail statements of county and school taxes by November 16, 2026, and those taxes are due on December 31, 2026. The provision expires on March 31, 2027. (Delaware Code, Title 9, Chapter 83, Subchapter I: § 8306 (standard of assessment; frequency of reassessment), § 8345 (quality-control mechanism, New Castle County))

The Senior School Property Tax Credit is the state’s one broad break for older owners. Homeowners 65 or over receive a credit of 50% of regular school property taxes, up to $500, on a primary residence. Anyone who established legal domicile in Delaware on or after January 1, 2018 must have been domiciled in the state for at least 10 consecutive years to qualify; those who arrived in 2013 through 2017 needed three years. The application deadline is April 30, and the prior year’s property tax bill must have been paid in full. (Delaware Department of Finance: Senior School Property Tax Relief)

Counties run their own programs with much tighter income tests. Sussex County, for example, exempts up to $229,000 of assessed value for residents who are 65 by June 30, have lived in the county full time for five years and have income, not counting Social Security, of no more than $6,000 if single or $7,500 if married. (Sussex County, Delaware: Tax Assistance Programs)

Buying a home carries a realty transfer tax. The state rate is 3% of the property’s value, or 2.5% where the county or municipality has enacted its own 1.5% tax, for 4% in total, and the statute apportions the state tax equally between seller and buyer. On a $500,000 home that is $20,000, or $10,000 a side. A first-time home buyer’s share is reduced by half a percentage point on up to $400,000 of value, at most $2,000. (Delaware Code, Title 30, Chapter 54: Realty Transfer Tax (§ 5401 definitions, § 5402 rate of tax and first-time home buyer reduction))

Delaware does not impose a state or local sales tax, so groceries, prescription drugs, clothing, appliances and restaurant meals are all bought without one. What the state has instead is a gross receipts tax on the seller of goods or the provider of services, charged on total receipts with no deduction for costs. It is a tax on the business, at rates that vary by activity. (Delaware Division of Revenue: Doing Business in Delaware, Step 4: Learn About Gross Receipts Taxes)

As a comparative figure, the Tax Foundation lists Delaware’s state rate, average local rate and combined rate all at 0%. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

Vehicles are the main exception to buying tax free. The sale, transfer or registration of a motor vehicle in Delaware carries a document fee of $8.00 on a purchase price under $400, $13.75 from $400 to $500, and $5.25 for each further $100 of price or part of it. That works out to about 5.25%, or roughly $2,100 on a $40,000 car. (Delaware Code, Title 30, Chapter 30: Motor Vehicle Document Fee (§ 3002))

Delaware has no estate tax. The chapter of the Delaware Code that imposed one was repealed effective January 1, 2018, so the estate of anyone who has died since then owes no Delaware estate tax and faces only the federal estate tax. (Delaware Code, Title 30, Chapter 15: Estate Tax (repealed by 81 Del. Laws, c. 52, effective January 1, 2018))

There is no inheritance tax either: the inheritance tax chapter of the Delaware Code has also been repealed, and heirs pay nothing to the state on what they receive. Real estate a Delaware resident owns in another state can still be subject to that state’s estate or inheritance tax. (Delaware Code, Title 30, Chapter 13: Inheritance Tax (repealed))

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

Senate Bill 219, as amended by Senate Amendment 1, was signed on August 17, 2026 and is chapter 426 of volume 85 of the Laws of Delaware. It raises the military pension exclusion to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029 at any age, and it adds the rule that a person 60 or older qualifies for the pension subtraction only after three years of Delaware domicile, or five years for someone who becomes domiciled on or after January 1, 2027. The Act has no effective-date or applicability section, so its text does not say which tax year the domicile rule first applies to, and it has no separate provision for people who were already claiming the exclusion. The 2026 return instructions, which will show how the Division of Revenue applies the rule, had not been published when this page was reviewed. (Delaware General Assembly, 153rd General Assembly, Senate Bill 219 as amended by Senate Amendment 1 (signed August 17, 2026; 85 Del. Laws, c. 426))

A proposal to add higher brackets did not pass. House Substitute 2 for House Bill 13 would have kept 6.6% up to $150,000 of taxable income and taxed income above that at higher rates for years beginning after December 31, 2025. A motion to release it from the House Revenue and Finance Committee failed on June 18, 2025, and the General Assembly has since ended, so the 2014 rate table remains in force for 2026. (Delaware General Assembly, 153rd General Assembly, House Substitute 2 for House Bill 13: bill detail and history)

Property taxes are the area still in motion. Every county must now reassess at least once every five years, and New Castle County’s 2026 county and school tax statements, delayed by the review of non-residential values, are due to be mailed by November 16, 2026 with payment due December 31, 2026. (Delaware Code, Title 9, Chapter 83, Subchapter I: § 8306 (standard of assessment; frequency of reassessment), § 8345 (quality-control mechanism, New Castle County))

A resident is an individual who is domiciled in Delaware, for the period of that domicile, or who maintains a place of abode in the state and spends more than 183 days of the taxable year there. A person who keeps a Delaware home and passes 183 days is therefore a resident even if domiciled elsewhere. (Delaware Code, Title 30, Chapter 11, Subchapter I: § 1102 (rates of tax), § 1103 (resident individual defined))

The instructions define domicile as the place a person intends to be their permanent home and to which they intend to return; it continues until the person moves and shows a genuine intention of making the new place permanent. Part-year residents may file either the resident return or the non-resident return, Form PIT-NON, and the instructions suggest preparing both and filing whichever is more advantageous. The non-resident form tends to be better when there was income from other states during the months spent outside Delaware. (Delaware Division of Revenue, 2025 Individual Income Tax Return, Resident: Form PIT-RES instructions)

Under federal law (4 U.S.C. 114) a state cannot tax the retirement income of a person who is not its resident or domiciliary. A pension or 401(k) earned during a Delaware career is taxed only by the state where the retiree lives when it is paid, and a pension earned elsewhere becomes Delaware income once the retiree is a Delaware resident. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)