Delaware Tax Strategy: Corporate Haven, Personal Planning
Delaware is famous for business-friendly laws, but personal income tax up to 6.6% plus federal rates can take over 40% of retirement income. Section 7702 provides complete tax freedom.
The Delaware Tax Reality
Delaware offers no sales tax and business-friendly laws, but personal income tax combined with federal rates can significantly erode retirement savings.
✅ The Good News
- No sales tax
- Social Security fully exempt
- Business-friendly legal environment
- $12,500 retirement income exclusion (65+)
⚠️ The Challenge
- Top rate 6.6% on income over $60,000
- Federal taxes still apply (up to 37%)
- Combined rate can exceed 43%
- High property taxes in some areas
Delaware Tax By The Numbers
Section 7702: Your Tax Freedom Solution
Section 7702 of the IRS tax code creates a powerful opportunity: access your retirement funds through policy loans that are completely tax-free—at both federal and state levels. For Delaware residents, this means escaping both the state tax burden and federal taxation entirely.
Federal Tax-Free
Policy loans bypass federal income tax entirely. No 22-37% federal tax on your retirement income.
State Tax-Free
No Delaware state income tax on policy loans. Your retirement income stays tax-free at the state level.
Delaware Professionals We Typically Serve
Financial Services Executives
Banking and credit card company leaders in Wilmington
Pharmaceutical Professionals
Scientists and executives in Delaware chemical/pharma corridor
Corporate Attorneys
Lawyers serving Delaware-incorporated companies
Business Owners
Entrepreneurs leveraging Delaware corporate structures
Healthcare Professionals
Physicians at ChristianaCare and other systems
University Professionals
High-earning faculty at University of Delaware
Delaware Areas We Serve
Matt Nye's Recommendation
"Delaware is famous as a corporate tax haven, but do not confuse business incorporation benefits with personal tax advantages. The state income tax goes up to 6.6%, and the IRS does not care where your company is incorporated."
"For my Wilmington financial services clients and pharmaceutical executives, the tax math is brutal: 6.6% state plus up to 37% federal equals over 40% of your 401(k) going to taxes."
"Section 7702 solves this. Policy loans are not taxable income at federal or state level. You can stay in Delaware for the no-sales-tax shopping and business-friendly courts while enjoying truly tax-free retirement income."
— Matt Nye, 20-Year Industry Veteran
Frequently Asked Questions
Delaware has no sales tax. Is that enough tax advantage?
No sales tax is great for purchases, but retirement income is still taxed at state (up to 6.6%) and federal (up to 37%) levels. Section 7702 eliminates both income taxes entirely.
I work at a Wilmington bank. How does Section 7702 help?
Financial services salaries in Wilmington are high, meaning high federal and state taxes now and in retirement. Section 7702 converts taxable income into tax-free retirement income.
What is the $12,500 retirement exclusion?
Delaware excludes up to $12,500 of retirement income from state tax if you are 65+. But that is limited. Section 7702 policy loans have no limit—all your retirement income can be tax-free.
My company is incorporated in Delaware. Does that help my personal taxes?
Corporate incorporation in Delaware is about business law, not personal taxes. Your personal income is still taxed where you live. Section 7702 provides personal tax freedom.
I am considering moving from Pennsylvania to Delaware. Is that smart?
Delaware has slightly higher income tax (6.6% vs 3.07%) but no sales tax. Either way, federal taxes remain. Section 7702 eliminates both federal and state taxes—a better solution than moving.
Ready for Delaware Tax Freedom?
Discover how Section 7702 can eliminate both state and federal taxes on your retirement income. Schedule your free analysis today.
Schedule Your Delaware Tax Analysis →Free 30-minute consultation. No obligation. No sales pressure.