Tool | November 2018

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).

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

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). Railroad Retirement benefits are exempt.

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. Railroad Retirement benefits are exempt.

Property Taxes

The median property tax on Delaware’s median home value of $233,100 is $1,274.

Tax breaks for seniors: 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.

Vehicle Taxes

At registration, state charges a fee for documentation. The rate is 4.25% of purchase price or NADA book value, whichever is greater.

Inheritance and Estate Taxes

Delaware's estate tax expired at the end of 2017.

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