Delaware retired pay

Is military retirement taxed in Delaware?

Partly taxed

$12,500 Now, $25,000 by 2029.

Partly. Since tax year 2022, Delaware has excluded up to $12,500 of military retired pay at any age, and SB 219, signed August 17, 2026, raises the military amount to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029. At 60 or older the $12,500 is shared with other pensions and investment income, and SB 219 adds a Delaware domicile test of 3 years (5 years for anyone domiciled from 2027 on) without saying which tax year it starts.

The law: Title 30, § 1106(b)(3) of the Delaware Code
Current rule since: tax year 2022 ($12,500 for military retirees under 60; the general $12,500 exclusion already applied at 60 and older); SB 219 schedule: $15,000 for 2027, $20,000 for 2028, $25,000 from 2029
Where you claim it: Form PIT-RES, Line 6 (Pension Exclusion), with the box checked showing the pension is from the United States military; enclose the 1099-R

Read on Delaware’s own sources October 9, 2026

What Delaware’s rule is worth on your retired pay

Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at Delaware’s top 6.6% rate for 2026 (taxable income over $60,000) for tax year 2026; change it to your own bracket if you know it.

One rate applied to the whole amount, not Delaware’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.

How it works in Delaware

Work out your age on December 31 first. A retiree who was under 60 on that date enters the smaller of the pension or $12,500 on Line 6 of the 2025 PIT-RES and checks the box showing the pension is from the United States military. The same instructions hold a non-military pension at that age to $2,000.

At 60 or older the Line 6 worksheet changes. It adds the pension to eligible retirement income (IRA and 401(k) distributions, dividends, interest, capital gains and net rental income) and caps the total at $12,500. A 62-year-old with an assumed $30,000 of retired pay and $8,000 of IRA withdrawals still excludes $12,500, not $20,500.

Each spouse gets a separate exclusion. The instructions allow one pension exclusion per taxpayer, one each when both spouses draw pensions, and SB 219 now writes into § 1106 that the paragraph's dollar limits apply individually to each spouse receiving a United States military pension on a joint return, never more than twice the relevant limit. Two military retirees under 60 on a joint 2026 return can take off up to $25,000.

On an assumed $36,000 pension, $12,500 comes off for 2026 and $23,500 stays taxable. At the 6.6% rate on taxable income over $60,000, the exclusion is worth at most $825 a year. Under the SB 219 schedule the same pension sheds $15,000 in 2027, $20,000 in 2028 and $25,000 from 2029, worth up to $1,650 a year at 6.6%.

To fix an earlier year, file that year's PIT-RES with the Amended Return box checked and enclose the 1099-R. Delaware allows three years from the original due date or two years from payment, whichever is later, so 2023 through 2025 can still be corrected in October 2026, while 2022 is closed for most filers.

Survivor Benefit Plan annuities

Not addressed directly. The 2025 PIT-RES instructions say pensions of a deceased taxpayer can count toward the Line 6 exclusion, so a survivor 60 or older can use the general $12,500 exclusion. For a survivor under 60, the instructions describe the $12,500 amount only for someone who retired from the United States military, while § 1106 defines a military pension as one received as a result of an individual's service; the Division's pages do not say where Survivor Benefit Plan annuities fall (read October 9, 2026).

Active-duty pay in Delaware

Taxed. The residency table in the 2025 PIT-RES instructions marks a Delaware legal resident's military active-duty income as taxable by Delaware whether or not the member is stationed there.

Missed it in an earlier year?

Generally, an amended PIT-RES must be filed within three years after the original return was due, or within two years after the tax was paid, whichever is later (2025 PIT-RES instructions).

What trips Delaware retirees up

SB 219, as changed by Senate Amendment 1, adds a domicile test for anyone 60 or older: 3 years of Delaware domicile for people domiciled before January 1, 2027, and 5 years for people domiciled on or after that date. The amendment's synopsis calls it a condition of "this exemption", but the enacted text attaches it to the whole paragraph (b)(3) subtraction, so as written it reaches general pensions and retirement income at that age, not only military pay. The Act took effect on signature, August 17, 2026, has no section naming the tax year the test starts, and does not say on what date the 3 or 5 years are counted. Whether it governs 2026 returns is unsettled; the Division of Revenue had published nothing on it as of October 9, 2026.
The Division's Personal Income Tax FAQ still tells filers under 60 that the exclusion is limited to $2,000 (read October 9, 2026). That answer predates the 2022 military change. File from the 2025 PIT-RES instructions, which carry the $12,500 military figure.
From 2027 a retiree 60 or older takes the greater of two amounts, not their sum: the general $12,500 exclusion for pensions and retirement income, or the military pension limit. Once the military limit is the larger one, IRA withdrawals and interest add nothing more.
Social Security and Railroad Retirement benefits are excluded on their own line (Line 8a in the 2025 instructions), so starting Social Security does not shrink the military exclusion.

Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. Delaware’s other servicemember protections are on the Delaware SCRA page.

Frequently asked questions

Does Delaware tax military retirement pay?

Only the part above the pension exclusion. Under Title 30, § 1106(b)(3) of the Delaware Code, a military retiree under 60 excludes up to $12,500 of retired pay for tax years 2022 through 2026, and a retiree 60 or older gets the general $12,500 exclusion, which also has to cover IRA withdrawals, dividends, interest and similar income. You claim it on Form PIT-RES, Line 6, and check the box for a United States military pension, per the 2025 instructions read October 9, 2026. SB 219, signed August 17, 2026, raises the military amount to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029.

Is SBP taxed in Delaware?

Yes, above the pension exclusion. Delaware's 2025 PIT-RES instructions say pensions of a deceased taxpayer can count toward the Line 6 exclusion, so a surviving spouse 60 or older can exclude up to $12,500 under the general rule. For a survivor under 60, the instructions tie the $12,500 military amount to a filer who retired from the United States military and say nothing about Survivor Benefit Plan annuities. The statute defines a military pension as one received as a result of an individual's service, which leaves room for a survivor, but the Division had not addressed it as of October 9, 2026. Until the Division says otherwise, only the $2,000 general amount is clearly supported for a survivor under 60.

What does Delaware SB 219 change for military retirees?

SB 219, signed August 17, 2026, raises the military pension exclusion in steps: $15,000 for tax year 2027, $20,000 for 2028 and $25,000 for 2029 and later, at any age. At 60 or older you take the greater of the military amount or the general $12,500 pension and retirement income exclusion, not both. The bill also says each spouse on a joint return who receives a military pension gets a separate limit. Senate Amendment 1 added a domicile test for filers 60 and older: 3 years for people domiciled in Delaware before January 1, 2027, and 5 years for those domiciled on or after that date. The Act does not say which tax year that test starts.

Do I have to live in Delaware for a while to get the pension exclusion?

If you are 60 or older, the law as amended by SB 219 says yes. Title 30, § 1106(b)(3) now makes a filer 60 or older eligible for the pension exclusion only with at least 3 years of Delaware domicile if domiciled before January 1, 2027, or 5 years if domiciled on or after that date. A resident individual under § 1103 counts as domiciled. The bill took effect when signed on August 17, 2026 but names no tax year for this test, so whether it applies to 2026 returns is unsettled, and the Division of Revenue had issued no guidance on it as of October 9, 2026. Filers under 60 face no domicile test.

Sources, read October 9, 2026

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