Delaware does not tax Social Security benefits at all, and it lets retirees 60 and older exclude up to $12,500 of other retirement income per person. A Delaware taxpayer under 60 gets the greater of two amounts: up to $2,000 of pension income from an employer, the federal government, or the state, or up to $12,500 of a United States military pension. So a military retiree under 60 is not held to the $2,000 figure; the larger military branch applies instead. For taxpayers 60 and older, Delaware's exclusion reaches pensions, IRA and 401(k) withdrawals, and even certain interest, dividends, and capital gains. Retirement income above the exclusion is taxed at Delaware's graduated rates, which reach 6.6 percent. The per-person structure and the age-60 threshold decide how much you actually keep.

This guide breaks down how Social Security, pensions, IRA and 401(k) income, and the senior exclusion each work, and where the age and per-person rules matter most.

In This Guide

Delaware Retirement Income Tax at a Glance

Delaware handles retirement income in two moves: Social Security is fully out, and a single Pension Exclusion covers most other retirement income. The size of that exclusion turns on your age, and it applies per person rather than per household. The table below lays out each source.

Income type Treatment Limit or amount Income test
Social Security Fully exempt 100% of benefits None
Pension (eligible) Exempt up to the cap $12,500 per person (60+); under 60, the greater of $2,000 or $12,500 Age-based, not income-based
U.S. military pension (under 60) Exempt up to the cap Up to $12,500, the larger branch of the under-60 rule Age-based, not income-based
IRA and 401(k) income Eligible for the exclusion (60 and older) Shares the per-person cap Age-based, not income-based
Senior-specific exclusion The Pension Exclusion serves this role $12,500 per person (60+) n/a

Delaware's graduated income tax runs from 2.2 percent to 5.55 percent on taxable income under $60,000, and reaches 6.6 percent on taxable income of $60,000 or more. Taxable income of exactly $60,000 sits in the 6.6 percent band. Whatever retirement income falls outside the exclusion above is taxed under that schedule.

There is also a second, separate break tied to age 65 rather than age 60. Under 30 Del. C. § 1108(b)(1), $2,500 is added to the standard deduction of a taxpayer who has attained the age of 65 before the close of the taxable year. That addition is not part of the Pension Exclusion and does not come out of the $12,500 cap; it is a larger deduction, claimed on the return alongside whatever the exclusion shelters. The base standard-deduction amounts it is added to are set on the current Delaware resident return and its instructions, so take those figures from the Delaware Division of Revenue rather than from this page.

Delaware Retirement Income Tax: How It Works

Delaware builds its system around one broad Pension Exclusion rather than separate rules for each income type. The Delaware Division of Revenue fully exempts Social Security and Railroad Retirement benefits, then lets eligible taxpayers exclude a set amount of other retirement income.

The exclusion is age-gated, and the under-60 rule has two branches. Taxpayers 60 and older can exclude up to $12,500 per person of eligible retirement income. A taxpayer under 60 takes the greater of up to $2,000 received as a pension from an employer, the United States, the state of Delaware, or one of its subdivisions, or up to $12,500 received as a United States military pension. The line falls on 60 itself: a taxpayer who is exactly 60 is under the 60-and-older rule, with the full $12,500 against eligible retirement income rather than the narrower under-60 branches. Delaware sets the exclusion as a cap by age rather than an amount that shrinks as income rises, so a high-income retiree 60 or older still reaches the full $12,500. The catch is the breadth of what counts and the per-person structure, both of which decide how much of your income the exclusion actually shelters.

Social Security

Delaware does not tax Social Security or Railroad Retirement benefits. Delaware states that exemption with no income test attached, so a retiree with a large pension keeps the same full Social Security exemption as one living on benefits alone.

This is the cleanest piece of the Delaware retirement income tax. Social Security comes out under its own exclusion rather than out of the Pension Exclusion, so your benefits do not count against the $12,500 cap that shelters your pension or account income.

The Pension Exclusion

The Pension Exclusion is the centerpiece. For taxpayers 60 and older, it shelters up to $12,500 per person of eligible retirement income. What matters most is its reach: for taxpayers 60 and older, Delaware defines eligible retirement income broadly to include pensions, qualified plan distributions from IRA, 401(k), and Keogh accounts, government deferred compensation, and certain interest, dividends, capital gains, and net rental income from real property. So a retiree without a traditional pension can still use the full amount against investment and account income.

Two conditions limit that "certain" investment income. First, Delaware states this broad definition of eligible retirement income for taxpayers 60 and older; it does not spell out the same reach for the under-60 exclusion, which the statute writes in terms of pension income rather than eligible retirement income, so a taxpayer under 60 should confirm with the Division of Revenue what counts before planning around it. Second, whatever qualifies still shares the single $12,500 per-person cap rather than adding to it, so interest and dividends compete with pension and account income for the same shelter. If most of your income is investment income, confirm which of yours counts against the Delaware Division of Revenue's definition of eligible retirement income on the personal income tax FAQs before you assume the full exclusion applies.

For taxpayers under 60, Delaware writes the exclusion as two branches and lets you take whichever is greater. The first branch shelters up to $2,000 received as a pension from an employer, the United States, the state of Delaware, or one of its subdivisions. The second shelters up to $12,500 received as a United States military pension. Either way it is a ceiling on what you actually received, not a flat amount handed to everyone.

That second branch is the one most people miss, and it changes the number more than sixfold. A 55-year-old retired from a civilian employer shelters no more than $2,000 of pension income. A 55-year-old drawing a military pension shelters up to $12,500, the same ceiling a 60-year-old gets. Delaware's statute at 30 Del. C. § 1106 defines a United States military pension as one received for service in the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, the commissioned corps of the Public Health Service, or the National Guard. If you are under 60 and drawing one of those pensions, confirm the military branch with the Delaware Division of Revenue or your tax preparer before you file against the $2,000 figure.

Because the exclusion is per person, a married couple both 60 or older can exclude up to $25,000 combined, provided each has eligible income in their own name.

Pensions, IRAs, and 401(k)s

All of these flow through the same Pension Exclusion. For a taxpayer 60 or older, a pension, a traditional IRA withdrawal, and a 401(k) distribution are each eligible retirement income that can be sheltered up to the per-person cap. For a retiree living entirely on 401(k) and IRA draws, that means the same $12,500 of shelter a pensioner gets.

The limit is the cap itself. The exclusion is shared across all eligible sources for a given person, so $10,000 from a pension plus $8,000 from an IRA does not get two exclusions; a 60-or-older taxpayer excludes $12,500 of the $18,000 combined, leaving $5,500 taxable. Above the cap, income is taxed at Delaware's graduated rates.

If you are weighing how much to draw from these accounts to cover care, retirement accounts for care walks through the tradeoffs.

Putting It Together

The practical takeaway is that the value of Delaware's exclusion depends on your age and on whether both spouses have eligible income. Social Security comes out cleanly, the Pension Exclusion shelters a large slice of everything else once you turn 60, and only the remainder hits the graduated schedule.

Picture a married couple, both 65, with $36,000 in combined Social Security and $50,000 in additional retirement income, split as a $30,000 pension for one spouse and a $20,000 IRA draw for the other. The Social Security is fully exempt. Each spouse applies their own $12,500 exclusion, so $25,000 of the $50,000 comes out, leaving $25,000 exposed to the graduated schedule before any other deductions or credits. Because that exposed amount sits under $60,000, it falls in the 2.2 to 5.55 percent range rather than the 6.6 percent top rate. The figures here are hypothetical and shown only to illustrate how the per-person exclusion works; they are not a real case and not a prediction of your own outcome.

You take the exclusion on your Delaware resident personal income tax return. Check the current return and its instructions, and the Division of Revenue's own personal income tax FAQs, for the exclusion line and the eligible-income rules before you file.

This is general information rather than personalized tax advice. The age thresholds themselves are settled: 60 and older is $12,500 per person, and under 60 is the greater of $2,000 of employer, federal, or state pension income or $12,500 of a United States military pension. What is worth confirming with the Delaware Division of Revenue or a tax professional is which of your investment income counts as eligible retirement income, before you plan withdrawals around it. If retirement savings are part of how you will fund care, building a senior care funding plan is a useful next step.

Not sure how much of your pension Delaware will exclude? Chat with Brevy's care navigator to sort out your situation.

Frequently Asked Questions

Does Delaware tax Social Security?

No. Delaware fully exempts Social Security and Railroad Retirement benefits, to the extent they are included in your federal adjusted gross income, with no income limit. Benefits come out under that exclusion rather than out of the Pension Exclusion, so they do not use up the $12,500 cap.

How big is Delaware's Pension Exclusion?

Up to $12,500 per person for taxpayers 60 and older. For a taxpayer under 60 it is the greater of up to $2,000 received as a pension from an employer, the United States, the state of Delaware, or one of its subdivisions, or up to $12,500 received as a United States military pension. It is age-based, not income-tested, so high earners 60 and older still get the full amount.

Does Delaware tax military retirement pay if I am under 60?

Delaware's exclusion for a taxpayer under 60 is the greater of up to $2,000 of employer, federal, or state pension income or up to $12,500 of a United States military pension, so a military retiree under 60 can shelter up to $12,500 rather than $2,000. The statute counts service in the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, the commissioned corps of the Public Health Service, or the National Guard. Confirm the line and the amount with the Division of Revenue before you file.

Does Delaware tax 401(k) and IRA withdrawals?

For a taxpayer 60 or older, they are eligible retirement income for the Pension Exclusion, so up to $12,500 of them can be sheltered per person. Under 60, the statute writes the exclusion in terms of pension income rather than eligible retirement income, so ask the Division of Revenue how an IRA or 401(k) draw is treated before you count on it. Amounts above the cap are taxed at Delaware's graduated rates.

Can a married couple in Delaware exclude $25,000?

Yes, if both spouses are 60 or older and each has eligible retirement income in their own name. The $12,500 is per person and does not transfer between spouses.

Does Delaware give seniors anything besides the Pension Exclusion?

Yes. Delaware adds $2,500 to the standard deduction of a taxpayer who has attained the age of 65 before the close of the taxable year, under 30 Del. C. § 1108(b)(1). It is separate from the Pension Exclusion and turns on age 65 rather than age 60, so a 65-year-old retiree can have both. Check the current Delaware resident return and its instructions for the standard-deduction amounts and the line to claim the addition on.

What is Delaware's income tax rate on retirement income that gets taxed?

Delaware's graduated rate runs from 2.2 percent to 5.55 percent on taxable income under $60,000 and reaches 6.6 percent on taxable income of $60,000 or more. Retirement income above the exclusion is taxed under that schedule.

Next Steps

If you are retired in Delaware, the math starts with your age and the Pension Exclusion. Everything else follows from how much eligible income clears the per-person cap.

  • Confirm the Social Security exemption applies; it carries no income limit.
  • Check your age against 60 so you know which rule you are under; age 60 itself puts you in the $12,500 band.
  • If you are under 60, check both branches and take the greater: up to $2,000 of employer, federal, or state pension income, or up to $12,500 of a United States military pension.
  • Run all eligible income through the exclusion once you are 60 or older, including pensions, IRA, and 401(k) draws.
  • At 65, claim the standard-deduction addition too: Delaware adds $2,500 to the standard deduction of a taxpayer who has attained the age of 65 before the close of the taxable year, separately from the exclusion.
  • Title accounts so both spouses qualify if you want the full combined exclusion.

If you are mapping out how to pay for care, how to pay for senior care covers the main routes.

Learn More

FinancialDelaware Senior Property Tax ReliefDelaware homeowners 65 and older can cut their school property tax bill in half, up to $500 a year, with no income test. Here is how to apply and who qualifies. FinancialHow Each State Taxes Retirement IncomeRetirement income tax varies enormously by state. Learn how states treat Social Security, pensions, and IRA or 401(k) money, and find your state's rules. FinancialHow to Pay for Senior CareHow to pay for senior care: what it costs nationally and how Medicaid, Medicare, VA benefits, and private pay each fit. Who qualifies, what's covered, in 2026. FinancialBuilding a Senior Care Funding PlanA step-by-step plan to pay for senior care: estimate the cost, inventory income and assets, find the payers you qualify for, sequence them, and get free help. FinancialRetirement Accounts for CareHow to use a retirement account to pay for senior care: the tax on IRA and 401(k) withdrawals, the early-penalty exceptions, RMDs at 73, and the tax-spike trap.

Find personalized help making sense of the Delaware retirement income tax at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

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Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.