Delaware Taxes for Retirees

Delaware has become a top destination for retirees, and for good reason. The state offers significant financial benefits, including some of the most retiree-friendly tax policies in the country. According to the Delaware Division of Revenue, the state has:

• No sales tax
• No tax on Social Security or Railroad Retirement benefits
• Retirement income exclusion
• Low property taxes
• No inheritance tax

Combined with a relatively low cost of living, stunning beaches, and convenient access to cities like Philadelphia, New York City, and Washington D.C., Delaware offers an unbeatable mix of affordability and lifestyle appeal.

Is Delaware Tax-Friendly for Retirees?

Yes, Delaware is one of the most tax-friendly states for retirees. Numerous advantages can help reduce your overall tax burden, including:

• No Sales Tax: Delaware is one of only five states with no sales tax, allowing you to save money on everyday purchases and major expenditures alike.
• No Tax on Social Security or Railroad Retirement Benefits: Unlike many other states, Delaware does not tax federal retirement benefits, leaving more of your income intact.
• Retirement Income Exclusion: Residents aged 60 and older can exclude up to $12,500 of qualified retirement income, including pensions, IRAs, and 401(k) distributions, from state taxes. This exclusion helps retirees retain more of their hard-earned savings.
• Low Property Taxes: Delaware’s property tax rates are among the lowest in the nation, offering significant savings, especially for retirees on fixed incomes. In some areas, older adults may also qualify for property tax relief programs.
• No Inheritance Tax: Delaware does not impose an inheritance tax, ensuring that wealth transfers to heirs are free from state taxation.

In addition to these financial benefits, Delaware’s retiree population is expected to grow significantly. According to the Delaware Population Consortium, the population of residents aged 65 and older is projected to increase by more than 41% between 2020 and 2040. This reflects the state’s ongoing appeal to retirees and ensures access to a growing network of senior-focused services and amenities.

Combined, these tax benefits and lifestyle advantages make Delaware particularly appealing for retirees who want to maximize their retirement income while enjoying a comfortable lifestyle. Whether your income comes from Social Security, pensions, or investment accounts, Delaware’s tax policies help make retirement more affordable.

Is Pennsylvania or Delaware Better for Retirees?

Delaware and Pennsylvania both offer advantages for retirees. Delaware is known for its friendly tax policies, coastal location, and access to metropolitan areas. On the other hand, Pennsylvania does not tax distributions from pensions, IRAs, 401ks, or Social Security, and it offers a flat income tax rate of 3.07%.

Both states have unique benefits, and deciding between the two will depend on factors like income sources, lifestyle preferences, and proximity to family and amenities.

What are the Pros and Cons of Retiring in Delaware?

In addition to Delaware’s tax-friendliness toward retirees, the First State also has affordable housing options compared to nearby states like New Jersey and Maryland. Retiring in Delaware also provides you with easy access to the Atlantic Ocean beaches as well as cities like Manhattan and D.C.

However, expenses like healthcare and groceries can be higher than the national average, which you may not have to worry about if you move into a retirement community.

Should You Consider Moving to a Retirement Community in Delaware?

Besides the Delaware retirement tax benefits listed above, what other reasons are there to retire in Delaware? For one, the state has 28 miles of beaches, as well as a vibrant restaurant scene and art scene. Plus, due to its popularity among the retirement set, Delaware is home to some of the most beautiful, amenities-filled retirement communities in the country.

If you’d like to see the costs of retiring in a Delaware retirement community, choose one of our communities below to download a free information and pricing kit: