Delaware Subtractions from Income
U.S. Obligations - Interest received on obligations of the United States, and included on your federal tax return, is exempt from Delaware tax. Interest received on obligations for which the United States is NOT the primary obligor or which are NOT guaranteed by the full faith and credit of the United States is not exempt from tax (Examples are shown below).
Examples of Interest that IS NOT Exempt:
- Federal National Mortgage Association (Fannie Maes)
- Federal Home Loan Mortgage Corp.
- Government National Mortgage Association (Ginnie Maes)
- International Bank of Reconstruction and Development
- Student Loan Marketing Association (Sallie Maes)
Examples of Interest that IS Exempt:
- U.S. Treasury Bill, Bonds (Series E, F, G, H), Certificates, Notes
- Export Import Bank
- Federal Deposit Insurance Corp.
- Federal Farm Credit Bank
- Federal Intermediate Credit Banks
- Federal Land Banks
- Tennessee Valley Authority
- Mutual Fund Dividends (Dollar amount or percentage directly attributed to a U.S. obligation, provided the Mutual Fund reports that amount to you.)
Pension Exclusion - Amounts received as pensions from employers (including pensions of a deceased taxpayer) may qualify for an exclusion from Delaware taxable income, subject to the limitations described below.
An early distribution from an IRA or Pension fund due to emergency reasons or a separation from employment does not qualify for the pension exclusion. If the distribution code(s) listed in Box 7 of your 1099-R(s) is a 1, then that amount DOES NOT qualify for the pension exclusion. Also, if you were assessed an early withdrawal penalty on Line 58 of Federal Form 1040, that amount DOES NOT qualify for the pension exclusion.
Note: Each taxpayer may receive ONLY ONE exclusion, even if he or she is receiving more than one pension or other retirement distribution. A husband and wife who each receive pensions are entitled to one exclusion each.
Pension Income for under age 60 - IF you were under age 60 on December 31,2013, your exclusion equals $2000.00 or the amount of your pension, whichever is less if you received Eligible Retirement income. Eligible retirement income includes dividends, capital gains, interest, net rental income from real property and qualified retirement places such as IRA, 401(K), Keogh plans, and government deferred compensation plans.
Disability pension income paid by your employer is reported as wages on the federal return, until you reach the minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Therefore, Disability pension income would not qualify for the pension exclusion.
Exclusion for Certain Persons 60+ or Disabled - The law provides for exclusions from gross income to persons meeting certain qualifications. To see if you are eligible, please refer to Line 40 Worksheet.
DE State Tax Refund and Fiduciary - Delaware State tax refunds may be excluded to the extent they are included in federal adjusted gross income. You may include net subtractions from fiduciary adjustments derived from income received from an estate or trust, as shown on your Federal Form K-1, Beneficiary's Share of Income and Deductions.
Taxable Social Security Benefits/RR Benefits - Social Security and Railroad Retirement benefits are not taxable in Delaware and, therefore, should not be included in taxable income.
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