Retiring in Delaware: What the State Actually Takes

On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — Delaware takes $2,125 a year in state income tax.

That is the number people compare, and it is the smallest of three. Property tax adds about $2,152 on the state's $398,585 median home, and insurance another $1,375. The three together come to $5,652, placing Delaware 6th of 50.

A note before you start. This is general education, not tax advice. Every Delaware figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2025. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.

1. What Delaware takes from retirement income

On Social Security. Fully exempt, with no income threshold and no age condition. Delaware's PIT-RES instructions state it directly at Line 8a: Social Security and Railroad Retirement benefits are not taxable in Delaware and therefore should not be included in taxable income; the filer enters the total of any federally taxable payments on Line 8a as a subtraction. Because the exclusion operates by backing out whatever the federal return taxed, a Delaware retiree whose benefits are wholly untaxed federally simply has nothing to enter. Railroad Retirement benefits receive identical treatment.

On 401(k) and IRA distributions. 401(k), 403(b), Keogh, IRC 457 government deferred compensation and traditional IRA distributions all count as eligible retirement income under Delaware's pension exclusion. The age gate is the whole story, and it is age 60, not 59 1/2 OR 65. under age 60 a non-military filer gets only $2,000. It is per taxpayer, not per return: Delaware states that each taxpayer may receive only one pension exclusion even if receiving more than one pension, but that spouses who each receive pensions are entitled to one exclusion each — which is why the married-joint figure is $25,000. Delaware's own worked example makes the ceiling behaviour explicit: a couple both over 60, one with $14,500 of eligible retirement income and one with $4,500, get $12,500 + $4,500 = $17,000, and the second spouse cannot absorb the amount by which the first exceeded the cap. The 60-and-over calculation is broader than the pension itself: the filer adds the pension amount to 'eligible retirement income' — dividends, capital gains net of capital losses, interest, net rental income from real property, and qualified plan distributions — and excludes the lesser of that total or $12,500.

2. The rule that decides your Delaware bill

Private and public pensions are treated identically in Delaware — checked rather than assumed. There is no government-pension carve-out: a state, county, school district or federal civil service pension runs through exactly the same $2,000-under-60 / $12,500-at-60-and-over exclusion as a private employer's pension. Military retirement is the one genuine divergence, and it helps the young retiree specifically. Delaware's instructions carve out military separately for the under-60 band: a filer under 60 on December 31 who retired from the United States military and received pension income excludes $12,500 or the amount of the pension, whichever is less — the same amount a 60-year-old gets, and more than six times the $2,000 a non-military under-60 retiree gets. The filer must check the box indicating the pension is from the United States military. At 60 and over the military Advantage disappears, because everyone reaches $12,500 — so this is a bridge for the younger military retiree rather than a permanently larger benefit, and describing Delaware as exempting military pensions in full would be wrong at every age.

Delaware exempts Social Security and Railroad Retirement entirely, then gates everything else on turning 60 — the exclusion jumps from $2,000 to $12,500 on that birthday.

The exclusion is per taxpayer, so a married couple both over 60 can reach $25,000, but neither spouse can use the other's unused room.

3. What Delaware charges at three income levels

The same state, three retirements. All figures are for a single filer aged 70.

The marginal rate at the typical profile is 5.5%. That is what an extra dollar of distribution costs — a larger number than the 2.2% effective rate, and the one that matters when deciding how much to withdraw.

A married couple with $48,000 of Social Security and $62,000 of distributions pays $1,306.

4. Property tax, and why it lands harder in retirement

An effective rate of 0.5% on the state's $398,585 median home is about $2,152 a year.

For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.

It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.

Delaware does have a homestead provision, and it is the one lever on this line worth understanding.

Delaware has no broad statewide ad-valorem homestead exemption for all owner-occupants (unlike FL or TX). Instead it offers two narrower, county-administered credits against school property tax only: the Senior School Property Tax Credit (homeowner 65+, Delaware domicile established by set dates — 10 years' residency if domiciled after Jan 1, 2018, or 3 years if domiciled Jan 1, 2013-Dec 31, 2017) and the 100% Disabled Veterans School Tax Credit (service-connected total disability rating from the VA, 3 years' Delaware domicile, credit equals 100% of the school-tax portion). The two credits cannot be claimed simultaneously, and both require an application to the county (New Castle, Kent, or Sussex) by an April 30 deadline — not automatic.

Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.

5. Insurance, the line nobody prices

Average home insurance in Delaware: $1,375 a year — 4th cheapest of the fifty states.

This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.

For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.

6. What retiring in Delaware actually costs

Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. Delaware is shown against its own neighbours in the ranking, and against the extremes.

Delaware comes to $5,652, 6th of 50.

Income tax is 38% of that total. It is the line every comparison leads with and, here, not the largest of the three.

One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.

7. No special treatment, and what that simplifies

Delaware gives retirement income no special treatment. Distributions are taxed as ordinary income at the ordinary schedule, with no age trigger, no source distinction and no phase-out to plan around. 401(k), 403(b), Keogh, IRC 457 government deferred compensation and traditional IRA distributions all count as eligible retirement income under Delaware's pension exclusion. The age gate is the whole story, and it is age 60, not 59 1/2 OR 65. under age 60 a non-military filer gets only $2,000. It is per taxpayer, not per return: Delaware states that each taxpayer may receive only one pension exclusion even if receiving more than one pension, but that spouses who each receive pensions are entitled to one exclusion each — which is why the married-joint figure is $25,000. Delaware's own worked example makes the ceiling behaviour explicit: a couple both over 60, one with $14,500 of eligible retirement income and one with $4,500, get $12,500 + $4,500 = $17,000, and the second spouse cannot absorb the amount by which the first exceeded the cap. The 60-and-over calculation is broader than the pension itself: the filer adds the pension amount to 'eligible retirement income' — dividends, capital gains net of capital losses, interest, net rental income from real property, and qualified plan distributions — and excludes the lesser of that total or $12,500. That simplicity cuts both ways. There is nothing to lose by withdrawing more in one year than another, and nothing to gain by waiting — which makes Delaware an unusually clean state to plan a withdrawal order in, even though it is not a generous one.

8. What a Roth conversion costs in Delaware

Converting $50,000 to a Roth costs an extra $3,145 in Delaware tax — 6.3 cents on the dollar.

These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.

The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 6.3%. The federal tax is due either way.

9. What part-time work costs here

$20,000 of part-time work costs an extra $1,165 in Delaware tax — an effective 5.8% on the earnings.

Compare that with the 6.3% a Roth conversion costs. Earned income is the cheaper dollar here, which is unusual.

Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.

10. The order to draw your accounts in

The order you draw accounts in is worth real money, and the right order depends on the state.

Delaware applies the same treatment whenever you withdraw, so the order is a federal question rather than a state one — with the exception that the marginal rate is 5.5%, and a year of unusually high withdrawals pays that on the excess.

Smoothing withdrawals across years therefore beats lumping them, modestly. Take a large one-off distribution in a single year and it climbs the bracket schedule; spread the same amount over three and more of it stays low.

Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.

11. Or move across the state line

For most people the real alternative to Delaware is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.

Delaware is the cheapest of the group on these three lines, at $5,652. Crossing any of these borders costs money.

One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.

12. If you are moving to Delaware from somewhere else

The eight most populous states people leave, measured against Delaware on the same three lines.

Delaware is cheaper than 8 of these eight. That is the case for the move, on these lines.

A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.

Delaware charges a transfer tax on the purchase itself — 4%, customarily paid by the split. On the state's $398,585 median home that is about $15,943, once, at the point of sale. Closing costs here run about 2% to 4% of the price — $7,972 to $15,943 on the median home, which is the real entry fee for the annual saving this article has been describing.

13. What Delaware does not exempt you from

The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.

Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.

IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. What Delaware adds on top is a separate question from what the federal system takes.

14. Establishing that you actually live here

Any state tax advantage is worth nothing until Delaware is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.

The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.

15. Who Delaware actually suits

It suits an affluent retiree least. At the affluent profile the bill is $7,184, and whatever exclusion helps a modest income has stopped helping by then.

16. What to check before you decide

Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.

Get a real insurance quote on a real address. $1,375 is the state average; construction, roof age and exposure move it a long way.

Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in Delaware the mix between Social Security and distributions changes the answer.

And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.

Frequently asked questions

Does Delaware tax Social Security? No. Fully exempt, with no income threshold and no age condition. Delaware's PIT-RES instructions state it directly at Line 8a: Social Security and Railroad Retirement benefits are not taxable in Delaware and therefore should not be included in taxable income; the filer enters the total of any federally taxable payments on Line 8a as a subtraction. Because the exclusion operates by backing out whatever the federal return taxed, a Delaware retiree whose benefits are wholly untaxed federally simply has nothing to enter. Railroad Retirement benefits receive identical treatment.

Does Delaware tax 401(k) or IRA withdrawals? 401(k), 403(b), Keogh, IRC 457 government deferred compensation and traditional IRA distributions all count as eligible retirement income under Delaware's pension exclusion. The age gate is the whole story, and it is age 60, not 59 1/2 OR 65. under age 60 a non-military filer gets only $2,000. It is per taxpayer, not per return: Delaware states that each taxpayer may receive only one pension exclusion even if receiving more than one pension, but that spouses who each receive pensions are entitled to one exclusion each — which is why the married-joint figure is $25,000.

What about pensions — private, government, or military? A $50,000 pension costs $1,514 if private, $1,514 if a government pension, and $1,514 if military retired pay.

What does retiring in Delaware actually cost? Income tax of $2,125 on the typical profile, plus about $2,152 of property tax and $1,375 of insurance on the median home — $5,652, which is 6th of 50.

Is Delaware a cheap state to retire in? On these three lines it ranks 6th of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.

What does a Roth conversion cost in Delaware? An extra $3,145 in state tax on $50,000 converted, and $6,445 on $100,000. That is 6.3% of the amount converted, on top of the federal tax.

Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $1,165 in state tax, an effective 5.8%.

Would a neighbouring state be cheaper than Delaware? No — Delaware is the cheapest of itself and its neighbours on these three lines, at $5,652.

Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.

Does this article include local income tax? Some Delaware localities levy their own income tax on top of the state figure above — for example Wilmington 1.25%. Rates vary by municipality, so this is not included in the total; check your own locality.

Will Delaware's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.

What to do next

Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the line this article says decides it
• The Relocation Tax Playbook — establishing domicile, and the states that contest it