Pension exclusion for delaware

[alanbowers64]

I have a US government pension and social security. I get the exclusion. My wife only has social security. Does she get the Delaware $12,500 exclusion?

[GeoffreyG]

According to the Delaware Division of Revenue (as of 2016), Delaware taxpayers age 60 and older can exclude $12,500 of income from IRAs, 401(k) plans and pensions from state taxes.  For those younger than age 60, up to $2,000 of investment and qualified pension income is exempt from state taxes.

Social Security benefits are entirely exempt from Delaware state taxes.

If you are a Deleware taxpayer age 65 or older on December 31st of the year, and you don’t itemize your deductions, then you are eligible for an additional deduction of $2,500 over the standard amount.

So, in direct answer to your question, your wife is otherwise eligible for the $12,500 exclusion if she satisfies the age requirement; but none of her Social Security benefits (or yours for that matter) are taxable in the first instance.

As a qualitative judgment, Delaware is more "taxpayer friendly" to retirees and seniors than most other states that have an income tax.  In fact, there are only a few that offer larger tax breaks and incentives for retirees.  (Of course, certain other states, like Florida and Nevada for instance, have no state income tax at all.)

Thank you for asking this question.

[vonsteuben342]

As a Delaware resident. I'm unclear what's going on with Roth conversions and its 

application to the $12,500 Delaware state pension exclusion. The reading seems to

be that a withdrawal from an IRA would qualify toward this exclusion. However, the

TurboTax calculation does not apply this same qualification. Anyone have insight?

[AmyC]

The pension exclusion is for pensions according to the Delaware Individual Resident Income Tax Return Instructions for Forms(200-01) on page 10. Page 6 does refer to lump sum distributions and notes that IRA distributions are separate from pension and not subject to early withdrawal penalty.

@vonsteuben342