AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO EXCLUSION OF MILITARY PENSIONS FROM TAXABLE INCOME.

Lower Delaware taxes for military retirees

Delaware increases the amount of qualifying military pension income you can exclude from state income tax, regardless of age. The yearly military pension cap is $12,500 for 2022–2026, $15,000 for 2027, $20,000 for 2028, and $25,000 starting in 2029. Beginning in 2027, you claim the larger of your allowed general retirement subtraction or military pension subtraction—not both added together. The military subtraction cannot exceed the qualifying pension you receive or that year's cap. The general subtraction remains up to $2,000 for other pensions if you are under 60. At age 60 or older, it covers up to $12,500 of pensions and eligible retirement income. Qualifying service includes the Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, and National Guard. Pensions from the commissioned corps of the National Oceanic and Atmospheric Administration and Public Health Service also qualify. Eligible retirement income includes qualified retirement-plan payments, 401(k) and government deferred-compensation payments, dividends, capital gains, interest, and rent after deductible expenses. Eligible retirement income held by spouses jointly with survivorship rights or as tenants by the entirety counts half to each spouse.