Does Delaware tax retirement income? Understanding tax benefits for retirees and more
Learn about Delaware’s tax policies and other benefits the state has to offer to see if this is the right place for you to spend your retirement.
Home > Retirement > Retirement Taxes in Mississippi
Key takeaways
Delaware does have state income taxes, but exceptions allow residents over age 60 to exclude up to $12,500 in qualified retirement income from state income taxes, subject to eligibility requirements.
: Delaware does tax pension income, but exemptions may apply, however, Social Security income is exempt from state income taxes.
: Each state has unique advantages and potential disadvantages. It is important to weigh them out when deciding if you want to relocate.
What are Delaware’s taxes on retirement income?
When considering relocating during retirement, many retirees look to states with lower taxes to stretch their retirement funds. Retirement taxes in Delaware, along with other tax perks, make the First State appealing to retirees.
Delaware does tax retirement income through its graduated state income tax system, with graduated rates reaching up to 6.60%, depending on your earned income.1 However, certain exemptions may apply.
Retirees aged 60 and older may also be able to exclude qualified retirement income, but restrictions may apply.2 You may also want to consider federal tax rates.If you are looking to relocate to the First State during retirement, you might want to consult a retirement financial advisor to help determine how much income taxes you would be paying.
Does Delaware tax pensions and Social Security?
Income you receive from pensions is subject to personal income tax in Delaware, but deductions may still apply. Social Security income, on the other hand, is exempt from state income taxes, which can help you maximize your Social Security benefits. However, federal taxes may still apply.
What other taxes do retirees pay in Delaware?
While Delaware does impose personal income taxes, other tax benefits can make it a tax-friendly state for retirees. Numerous advantages can help reduce the overall tax burden for retirees, including:
Sales taxes in Delaware
Delaware is one of five states that does not impose state or local sales taxes. This allows you to save money on everyday purchases, shopping, and other major expenses.
Property taxes in Delaware
The First State has some of the lowest property taxes in the country, with an average effective property tax rate of 0.50%.3 This rate may vary depending on the county or municipality. Some retirees may also be eligible for property tax relief programs.
It is useful to note that Delaware does not have personal property taxes, so you will not owe annual taxes on RVs, boats, or automobiles on the state level.
Capital gains taxes in Delaware
Delaware taxes capital gains as ordinary income. While the state does not impose inheritance taxes, it does have an estate tax that may apply to estates exceeding the state exemption threshold.
Is Delaware tax-friendly for retirees?
Due to the absence of sales taxes, along with low property and income tax rates, this makes Delaware a tax-friendly state for retirees. The First State offers many tax benefits that can be attractive to those with a fixed retirement budget or those seeking to minimize their tax burden in retirement.
Pros and cons of retiring in Delaware
However, tax benefits aside, it is still important to consider the advantages and disadvantages of living in Delaware to help determine if this is the right state for you.
The pros of retiring in Delaware
- Proximity to major cities: You can easily reach Philadelphia, Baltimore, Washington, D.C., and New York City without the high cost of living of those cities.
Moderate climate: Delaware has relatively mild seasons compared to other northern states.
Coastal access and outdoor recreation: Coastal towns like Rehoboth Beach and Bethany Beach offer relaxed, scenic environments for retirement. The First State is also home to various state parks, beaches, and forests, providing opportunities for outdoor recreation like hiking, boating, or fishing. Delaware’s well-known golf courses are also attractive for some retirees.
Small-state feel with a peaceful environment: Less congestion, shorter commutes, and a mix of small-town charm and urban amenities make it the perfect location for those looking for a more relaxed environment during retirement.
The cons of retiring in Delaware
- Limited public transportation: Public transportation options can be limited for those living outside major cities.
Variable access to healthcare: While there are quality hospitals, access to them may be difficult from rural areas, with options being more limited. This can be a concern for those with chronic health issues.
High cost of living: The cost of living is higher compared to the national average. Popular beach towns can lead to increased prices in real estate and living expenses.
Less entertainment diversity: Delaware is one of the smallest states in the country, and may therefore lack the cultural or nightlife variety found in major metropolitan areas.
Bottom line
Delaware offers various tax benefits to retirees along with a relaxed environment, providing ample opportunities for recreation to keep you entertained during retirement. It is important to weigh the pros and cons associated with retiring in Delaware before deciding to move. You might even consider seeking professional advice to review your finances and ensure it is the right financial decision for you.
Relocating during retirement can be an exciting way to start your golden years. If you are looking to supplement your retirement funds or simply want to boost your savings, Raisin is here to help. The Raisin marketplace gives you access to multiple high-yield savings products with competitive interest rates to help you make the most of your money. Sign up today and start maximizing your savings potential!
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
© 2026 Raisin SE. All rights reserved.
The Raisin name and logo are trademarks of Raisin SE. All other trademarks, logos, marks, and brand names are the property of their respective owners.
*APY means Annual Percentage Yield. APY is accurate as of April 26, 2026. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.
Raisin is not an FDIC-insured bank, and FDIC deposit insurance only covers the failure of an insured bank.
Raisin is not an NCUA-insured credit union. NCUA deposit insurance only covers the failure of an insured credit union.
Raisin does not hold any customer funds. Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered by the applicable bank or credit union through Raisin.com. Each customer also authorizes the Service Bank to move funds among the various banks and credit unions at the customer’s request. First International Bank & Trust (FIBT), Member FDIC, is the Service Bank. Bell Bank and Starion Bank, each Member FDIC, are the Custodial Banks.
†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.