SB 219 — AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO EXCLUSION OF MILITARY PENSIONS FROM TAXABLE INCOME.

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Amounts received, not to exceed $2,000, as pensions from employers, the United States, this State, or any subdivision of this State;

or B.

Amounts received, not to exceed $15,000, as a United States military pension.

2.

For persons age 60 or older, the greater of:

A.

Amounts received, not to exceed $12,500, as pensions from employers, the United States, this State, or any subdivision of this State, or as eligible retirement income;

or B.

Amounts received, not to exceed $15,000, as a United States military pension.

d.

For the taxable year beginning on January 1, 2028:

1.

For persons under age 60, the greater of:

A.

Amounts received, not to exceed $2,000, as pensions from employers, the United States, this State, or any subdivision of this State;

or B.

Amounts received, not to exceed $20,000, as a United States military pension.

2.

For persons age 60 or older, the greater of:

A.

Amounts received, not to exceed $12,500, as pensions from employers, the United States, this State, or any subdivision of this State, or as eligible retirement income;

or B.

Amounts received, not to exceed $20,000, as a United States military pension.

e.

For taxable years beginning on or after January 1, 2029:

1.

For persons under age 60, the greater of:

A.

Amounts received, not to exceed $2,000, as pensions from employers, the United States, this State, or any subdivision of this State;

or B.

Amounts received, not to exceed $25,000, as a United States military pension.

2.

For persons age 60 or older, the greater of:

A.

Amounts received, not to exceed $12,500, as pensions from employers, the United States, this State, or any subdivision of this State, or as eligible retirement income;

or B.

Amounts received, not to exceed $25,000, as a United States military pension.

c.

f.

For the purposes of this paragraph (b)(3):

1.

A.

“Eligible retirement income” includes distributions received from qualified retirement plans defined in § 4974 of the federal Internal Revenue Code (“IRC”) (26 U.S.C.

§ 4974) or a successor provision, cash or deferred arrangements described in IRC § 401(k) (26 U.S.C.

§ 401(k)) or a successor provision, DLS :

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§ 457) or a successor provision, dividends, capital gains, interest, and rental income from real property less deductible rental expenses.

For purposes of this paragraph (b)(3)f.4.(b)(3)c., (b)(3)f., eligible retirement income received by spouses as joint tenants with right of survivorship or as tenants by the entirety is deemed to have been received ½ by each.

of2. this section, a person is legally domiciled in this State if the person is a “resident individual” under § 1103 of this title.”.

SYNOPSIS“United ThisStates Amendmentmilitary doespension” means a pension received as a result of an individual’s service in the following:Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, the commissioned corps of the Public Health Service, or the National Guard.

(1)SYNOPSIS ClarifiesOf that the subtraction41 modificationstates limitswith undera thisstate Actincome applytax, individually27 tostates eachfully spouseexempt whomilitary isretirement receivingpay afrom Unitedstate Statesincome militarytaxes pensionand onstates apartially jointexempt return.military retirement pay.

EachIn spouse2022, mayDelaware claimincreased the pension exclusion for military pensioners under 60 to $12,500, and in 2024, Delaware expanded the definition of a subtractionUnited upStates military pension to include a pension received for an individual’s service in the lessercommissioned corps of theirthe qualifyingNational incomeOceanic orand Atmospheric Administration and the per-personcommissioned limit.corps of the Public Health Service and clarified that the armed forces of the United States includes the Space Force and Coast Guard.

TheThis totalAct subtractionphases onin, aover joint3 returnyears, equalsan theincreased sumexemption offor themilitary individualpensions limitsfrom andstate mayincome nottaxation, exceedregardless of age, which is currently $12,500, so that combinedin amount.taxable years beginning on or after January 1, 2029, the exemption will be $25,000 for all military pensioners.

(2) Requires that to be eligible for this exemption, an individual who is age 60 or older and legally domiciled in this State before January 1, 2027, must be legally domiciled in this State for at least 3 years and an individual who is age 60 or older and legally domiciled in this State on or after January 1, 2027, must be legally domiciled in this State for at least 5 years.

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