Does Delaware Tax Military Retirement?
As a veteran or an active-duty military personnel, it’s essential to understand the tax implications of your military retirement benefits. If you’re considering moving to Delaware or already reside there, you may wonder whether the state taxes your military retirement income. In this article, we’ll provide a direct answer to this question and delve into the details of Delaware’s tax laws.
Direct Answer: Does Delaware Tax Military Retirement?
No, Delaware does not tax military retirement income. According to Delaware Code, Title 30, Chapter 54, Section 5401, military retirement pay is exempt from state income tax. This means that you won’t have to pay Delaware state income tax on your military retirement benefits.
Types of Military Retirement Benefits Exempt from Taxation
Delaware exempts the following types of military retirement benefits from state income tax:
• Military pension: This includes pensions, annuities, and other retirement benefits paid by the military or a government agency.
• Survivor benefits: If a spouse or dependent of a military member passes away, they may be eligible for survivor benefits, which are also exempt from state income tax.
• VA disability compensation: Veterans Affairs (VA) disability compensation is not considered taxable income in Delaware.
Important Notes
While Delaware does not tax military retirement benefits, it’s essential to note the following:
• Federal taxes: Your military retirement benefits are still subject to federal income tax. You may need to file a federal tax return and report your military retirement income.
• Other states’ taxes: If you’re a resident of Delaware but receive military retirement benefits from another state or government agency, you may still be subject to tax in that state.
• Other income: Delaware may tax other forms of income, such as social security benefits, pensions from non-military sources, or self-employment income.
Delaware Taxation of Other Forms of Income
While military retirement benefits are exempt from state income tax, Delaware does tax other forms of income, including:
• Wages and salaries: Income earned from employment in Delaware is subject to state income tax.
• Pensions and annuities: Pensions and annuities from non-military sources, such as private employers or government agencies, are subject to state income tax.
• Social security benefits: While a portion of social security benefits may be exempt from federal income tax, Delaware does tax social security benefits.
• Self-employment income: Income earned from self-employment in Delaware is subject to state income tax.
Delaware Tax Rates
Delaware has a relatively low state income tax rate compared to other states. For the 2022 tax year, the state income tax rates are as follows:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $2,000 | 2.2% |
| $2,001 – $5,000 | 4.2% |
| $5,001 – $10,000 | 5.2% |
| $10,001 and above | 6.2% |
Conclusion
In conclusion, Delaware does not tax military retirement benefits, providing a significant tax advantage for military personnel and veterans living in the state. However, it’s essential to understand that other forms of income may be subject to state income tax. If you’re a military retiree or considering moving to Delaware, it’s crucial to consult with a tax professional or financial advisor to ensure you’re taking advantage of all the tax benefits available to you.
