In a significant move to support military veterans, Delaware legislators have proposed an increase in pension tax exemptions for military retirees and Survivor Benefit Program (SBP) recipients. This new legislation, spearheaded by State Sen. Eric Buckson, aims to enhance the financial benefits for those who have served in the military.
The Proposed Legislation
The bill, known as Senate Bill 201 (SB 201), seeks to phase in an increased state income tax pension exclusion for military pensioners over three years. If passed and signed into law, this would result in an exemption for military pensions from state income tax for military pensioners of all ages, amounting to $25,000 in taxable years starting from January 1, 2026.
Current State of Tax Exemptions
As of now, in Delaware, the amount of pension and 401K income taxable for federal purposes is also taxable at the state level. However, those aged 60 years or older are entitled to a pension exclusion of up to $12,500 or the amount of the pension and eligible retirement income, whichever is less. Notably, Delaware does not tax Social Security payments.