State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees. Go to Retiree Tax Map Delaware Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Most Tax-Friendly No sales tax, low property taxes, and no death taxes make Delaware a tax haven for retirees. It's easier to spoil the grandkids when you pay zero state or local sales tax on your in-state purchases (the First State is one of only a handful of states with no sales tax).You'll also have more disposable income to spend on the grandkids, since property taxes are so low. The median annual property tax rate in Delaware is the seventh-lowest rate in the nation. Plus, some Delaware seniors qualify for a school property tax credit of up to $400 (you might have to live in the state for 10 years to get it, though).The only potential downside—and it really isn't that bad—are middle-of-the-road income taxes if you have an above-average income. Overall, though, the income tax rates are comparatively reasonable, and residents age 60 and older can exclude up to $12,500 of pension and other retirement income (including dividends and interest, capital gains, IRA and 401(k) distributions, etc.). Income Tax Range Low: 2.2% (on taxable income from $2,001 to $5,000)High:High: 6.6% (on taxable income above $60,000)Wilmington also imposes a city tax on wages. Taxation of Social Security Benefits Social Security benefits are not taxed by the state. Tax Breaks for Other Retirement Income Taxpayers age 60 and older can exclude up to $12,500 of pension and other retirement income (up to $2,000 for taxpayers younger than age 60). Eligible retirement income includes dividends, capital gains, interest, net rental income from real property and qualified retirement plans (e.g., IRAs, 401(k) plans, Keogh plans, and government deferred compensation plans).Railroad Retirement benefits are also exempt. Sales Tax No state or local sales tax. Real Property Taxes In Delaware, the median property tax rate is $562 per $100,000 of assessed home value. Homeowners 65 and older can get a credit equal to half of school property taxes, up to $400. However, residents who moved to Delaware after January 1, 2018, cannot receive the credit until they have lived in the state for ten consecutive years. If both people in a married household are 65 or older, only one school tax credit will be given to the household per year. If only one member is 65 or older, that person may still apply for the full tax credit. Additional exemptions for senior citizens are available, but they vary by county. Annual Car Taxes and Fees No annual vehicle tax or fee is imposed. Estate and Inheritance Taxes No estate or inheritance tax.