The sources say little about taxes beyond the points below, so this page is short.
- Your contributions are tax-deferred, so your pension is subject to federal income tax. The Office of Pensions withholds only Delaware state tax; if you move, check your new state's rules.Summary Plan Description (2026), p. 8; p. 35, Taxes
- Delaware lets each person exclude up to $12,500 of pension and retirement income at 60 or older, or up to $2,000 of pension income under 60.30 Del. C. §1106(b)(3)b; Division of Revenue PIT-EST 2025 instructions, p. 2
Federal tax
Pension contributions are tax-deferred (IRC 414(h)(2)) since 1993, so the monthly pension is taxable by the federal government; state tax depends on where you live. The Office of Pensions withholds only Delaware tax (W-4P and Delaware W-4) and sends a 1099-R by Jan. 31. Summary Plan Description (2026), p. 8; p. 31 (tax withholding forms); p. 35, Taxes; Table 7; Office of Pensions workshop slides (Aug. 4, 2026), slide 34
A refund paid to you in cash, rather than rolled over, has 20% federal tax withheld. Summary Plan Description (2026), p. 9 See leaving.
Delaware's pension exclusion (30 Del. C. §1106)
Delaware lets each person subtract up to $2,000 of pension income (under 60) or $12,500 of pension and eligible retirement income (60 or older). 30 Del. C. §1106(b)(3)b (tax years 2022-2026), c (2027); Division of Revenue PIT-EST 2025 instructions, p. 2, line 2 ($2,000 under 60 / $12,500 if 60 or over)
| Your age at year end | Pension income | Excluded | Left to tax |
|---|---|---|---|
| 58 | $30,000 | $2,000 | $28,000 |
| 62 | $30,000 | $12,500 | $17,500 |
| 65 | $9,000 | $9,000 | $0 |
Our illustrations for one person; a married couple each has their own exclusion. At 60 or older the $12,500 covers pension and other eligible retirement income together.
See also Social Security, post-retirement increases and the calculator.
Questions
Is a Delaware teacher pension taxed?
Yes, by the federal government, because your contributions went in before tax. Delaware taxes it too, but lets you exclude up to $2,000 of pension income under 60, or $12,500 of pension and retirement income at 60 or older.
Does the Office of Pensions withhold tax?
You choose withholding on the federal W-4P and the Delaware W-4. For state tax, the Office of Pensions withholds only Delaware tax, so if you move, check your new state's rules. It sends a 1099-R by January 31.
Source: State Employees' Pension Plan Summary Plan Description, 2026 edition (PDF dated May 14, 2026), pp. 8-9, 31, 35. Also: Office of Pensions workshop (Aug. 4, 2026), slide 34; Division of Revenue PIT-EST 2025 instructions; 30 Del. C. § 1106. Last reviewed .