State lawmakers file bipartisan legislation to increase the state income tax exclusion for military pensioners over a three year period.
In 2022, Delaware increased the pension exclusion for military pensioners under 60 to $12,500.
State Sen. Eric Buckson’s new legislation would establish a three-year phase-in of increased exemptions for military pensioners of all ages.
If signed into law, the exemption for military pensions from state income tax would rise to $25,000 in taxable years on or after January 1, 2026.
Of the 41 states with a state income tax, 27 states fully exempt military retirement pay from state income tax, but Buckson says he wanted to start smaller.
“I didn’t think I could convince the General Assembly to exempt it all, so we started with this tiered approach that competes with other states like Virginia and Maryland who’ve just done this.”
Buckson hopes the legislation will keep Delaware competitive with neighboring states in attracting military retirees.
“The reason that I have done it, hopefully, is to incentivize and encourage people with a very unique skill set – and that would be our military retirees – to want to stay here in Delaware when they get done with their service, or relocate to Delaware," he adds.
There are currently 12 states who partially exempt military retirement pay.
The bill has been assigned to the Senate Executive Committee for consideration.
