Military Retirement in Delaware: Complete 2026 Tax Guide
$12,500 pension exclusion + NO sales tax
Quick Summary: Delaware Military Retirement Taxes (2026)
- ✓ Military retirement pay: First $12,500 exempt; rest taxed up to 6.6%
- ✓ VA disability payments: Tax-free (federal and state)
- ✓ Sales tax: ZERO - Delaware has NO sales tax!
- ✓ Social Security: Fully exempt in Delaware
- ✓ Property tax: Among the lowest in the nation
Why Delaware Is Excellent for Military Retirement
Delaware offers a solid combination for military retirees: a $12,500 exclusion on military pension income, ZERO sales tax, tax-free Social Security, and some of the lowest property taxes in the nation. The First State punches well above its weight for veterans.
Delaware hosts Dover Air Force Base, the largest aerial port on the East Coast and the primary port of entry for fallen service members at the Charles C. Carson Center for Mortuary Affairs. Over 70,000 veterans call Delaware home, enjoying easy access to beaches, Philadelphia, Baltimore, and Washington D.C.
2026 Delaware Military Retirement Tax Breakdown
State Income Tax on Military Retirement Pay
First $12,500 Exempt
Delaware excludes the first $12,500 of military pension income from state income tax at any age. Retirement pay above that is taxed at graduated rates topping out at 6.6% above $60,000 of taxable income. SB 219, which would raise the exclusion to $25,000 by 2029, passed the state Senate in January 2026 and is awaiting House action.
No Sales Tax!
✓ Zero Sales Tax
Delaware is one of only 5 states with NO sales tax. This saves retirees thousands annually on all purchases - groceries, vehicles, electronics, and more.
Other Tax Benefits for Delaware Veterans (2026)
| Benefit | Details |
|---|---|
| Property Tax |
|
| Social Security | First $12,500 exempt; remainder taxed up to 6.6% |
| Sales Tax | ZERO - No sales tax in Delaware! |
| Pension Exclusion | $12,500 exclusion on other pension income (60+) |
Real Example: How Much You'll Save in Delaware (2026)
Example Scenario: E-7 Retired After 20 Years
- • Military retirement pay: $2,800/month ($33,600/year)
- • VA disability (50%): $1,133/month ($13,595/year)
- • Social Security: $1,500/month ($18,000/year)
- • Part-time job: $20,000/year
Delaware (Triple Tax Advantage)
Military retirement: $0 state tax
Social Security: $0 state tax
Sales tax savings: ~$1,200/yr
Only civilian income taxed (~$1,100)
Total tax: ~$1,100
California (Full Tax)
Most income taxed + 7.25% sales
Total tax: ~$4,500+
Annual Delaware Savings: $3,400+
Cost of Living in Delaware (2026)
Delaware's cost of living is moderate, with lower taxes offsetting slightly higher housing:
| Category | vs. National Average | Notes |
|---|---|---|
| Housing | +10% higher | Dover area: $320K, Beach towns: $400K+ |
| Groceries | Average (NO TAX!) | Save ~$400/yr vs states with food tax |
| Healthcare | Average | VA center in Wilmington, clinics statewide |
| Utilities | +5% higher | Moderate climate, some AC in summer |
Major Military Installations in Delaware
✈️ Dover Air Force Base
- Largest aerial port on East Coast
- 436th & 512th Airlift Wings
- C-5M Super Galaxy & C-17 operations
- Charles C. Carson Mortuary Affairs Center
- 7,000+ military & civilian employees
- Air Mobility Command Museum
🛡️ Delaware National Guard
- Army & Air National Guard
- Headquarters in Wilmington
- 166th Airlift Wing at New Castle
- Units throughout the state
Best Cities in Delaware for Military Retirees (2026)
| City | Nearby Base | Median Home | Why It's Great |
|---|---|---|---|
| Dover | Dover AFB | $320,000 | State capital, base access, most affordable, VA clinic |
| Smyrna | Dover AFB | $340,000 | Growing community, 15 min to base, family-friendly |
| Wilmington | NG Base | $280,000 | Largest city, VA medical center, Amtrak, near Philadelphia |
| Newark | NG/Reserve | $350,000 | University of Delaware, college town vibe |
| Rehoboth Beach | Dover AFB (30 min) | $700,000+ | Beach resort, active retiree community, tourism |
VA Healthcare in Delaware
- Wilmington VA Medical Center - Full-service hospital, primary care
- Dover VA Clinic - Outpatient services near Dover AFB
- Georgetown VA Clinic - Sussex County coverage
- Millsboro VA Clinic - Southern Delaware services
- Dover AFB Medical Facility - TRICARE services on base
- Note: Philadelphia VA (45 min from Wilmington) for specialized care
Education Benefits for Veterans & Families in Delaware
Delaware offers education benefits including free tuition for dependents of disabled/fallen veterans and in-state tuition for all veterans.
Delaware Educational Benefits for Veterans' Children
FREE Tuition Available
Children of veterans who are 100% disabled or who died from service-connected causes may receive free tuition at Delaware State University and the University of Delaware.
Delaware University Tuition Rates (2026)
| Institution | In-State | Out-of-State | Savings |
|---|---|---|---|
| University of Delaware | ~$14,500 | ~$38,000 | $23,500/yr |
| Delaware State University | ~$8,500 | ~$18,000 | $9,500/yr |
| Delaware Tech | ~$4,000 | ~$9,500 | $5,500/yr |
Official Resources: Delaware Commission of Veterans Affairs
Pros and Cons of Retiring in Delaware
✅ Pros
- ✓ $12,500 military pension exclusion at any age
- ✓ ZERO sales tax - saves thousands!
- ✓ Social Security also tax-free
- ✓ Very low property taxes
- ✓ Easy access to DC, Philly, Baltimore
- ✓ Delaware beaches (tax-free shopping!)
- ✓ Moderate four-season climate
- ✓ Dover AFB community
- ✓ Small state = short commutes
- ✓ No estate tax up to $5.85M
❌ Cons
- ✗ Only one major military base
- ✗ Beach area housing expensive
- ✗ Limited job market (small state)
- ✗ Some areas flood-prone
- ✗ Humid summers
- ✗ Traffic on Route 1 in summer
- ✗ Limited VA specialty care (travel to Philly)
Frequently Asked Questions
Does Delaware tax military retirement pay?
Partly. The first $12,500 of military pension income is excluded at any age; the rest is taxed at up to 6.6%.
Does Delaware have sales tax?
No! Delaware is one of only 5 states with ZERO sales tax. This is why outlet malls in Delaware are so popular with shoppers from neighboring states.
What military bases are in Delaware?
Delaware's primary installation is Dover Air Force Base, the largest aerial port on the East Coast. The Delaware National Guard also has facilities throughout the state.
Is Dover a good place for military retirees?
Yes! Dover offers affordable housing (~$320K median), Dover AFB access, a VA clinic, and the state capital's amenities. It's centrally located with easy access to beaches, Philadelphia, and Washington D.C.
Calculate Your Delaware Retirement Income
See exactly what you'll keep with the $12,500 exclusion + no sales tax
Use the Free Calculator →Comparing states? The $4.99 worksheet ranks your exact pension in all 50, Delaware included, with 20-year state tax totals for each. Get the worksheet or see a sample first.
See how Delaware stacks up in the full 50-state ranking of military retirement taxes.
Bottom Line for Delaware Military Retirement
Delaware still offers real advantages: a $12,500 pension exclusion, zero sales tax, and tax-free Social Security. Combined with low property taxes, easy access to major East Coast cities, and Dover AFB, Delaware is an excellent choice for military retirees who want to stay on the East Coast while minimizing their tax burden.