Tool | November 2017

State-by-State Guide to Taxes on Retirees

Delaware

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Map of Delaware

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In the First State, Social Security benefits are exempt, and taxpayers over 60 can exclude $12,500 of investment and qualified pension income from state income taxes, and income above that faces only modest tax rates. Homeowners 65 and older may qualify for a credit equal to half of school property taxes, up to $500. The biggest savings of all, though, may be Delaware's lack of any sales tax whatsovever.

State Sales Tax

Neither the state nor localities impose a sales tax. In response, New Jersey has halved the sales tax on many items in Salem County, which borders Delaware.

Income Tax Range

Low: 2.2% (on taxable income from $2,001 to $5,000)

High: 6.6% (on taxable income above $60,000).

Effective income tax rate: 4.4%/individual, 5.6%/joint

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt. Taxpayers 60 and older can exclude $12,500 of investment and qualified pension income. Out-of-state government pensions qualify for the pension and retirement exemption. For those younger than age 60, $2,000 of investment and qualified pension income is exempt. If you are 65 or older on December 31, you are eligible for an additional standard deduction of $2,500 (if you do not itemize).

IRAs

Qualifies for retirement-income exemption.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for retirement-income exemption.

Private Pensions

Qualifies for retirement-income exemption.

Public Pensions

Qualifies for retirement-income exemption.

Property Taxes

The median property tax on Delaware's median home value of $230,500 is $1,224.

Tax breaks for seniors: Homeowners 65 and older can get a credit equal to half of school property taxes, up to $500. However, residents who moved to Delaware after December 31, 2012, cannot receive the credit until they have lived in the state for three 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. Those 60 and older may be eligible for an exclusion if earned income is less than $2,500, and they are automatically entitled to a personal credit of $110. Additional exemptions for senior citizens are available, but they vary by county.

Inheritance and Estate Taxes

Delaware's estate tax will expire at the end of 2017. The estate-tax exemption is $5.49 million for 2017. Rates range from 0.8% to 16%. There is no inheritance tax.