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Benefit of Moving to Delaware

America’s Millennials are moving — and Boomers are following. Increasingly, they’re setting their sights on Delaware.

And while certain parts of the country will always be Millennial magnets and Boomer hot spots, it’s the lesser-known corners of the Mid-Atlantic (like Delaware) that are truly capturing the attention of folks who are on the move and looking for their next ideal home.

For Boomers, Millennials, and Gen-Xers alike, here are a few of the main benefits of relocating to the State of Delaware.

Picturesque, Quaint Villages & Farmland

Delaware is a small state. That means several things but among the most relevant for home-seekers is the wonderful variety of charming villages that dot the countryside. If you want small-town charm where you can greet people by name when you walk down the street, Delaware has it — in spades.

But being small also means that no matter where you are in the state, you’re close to the water. There are beaches — Rehobeth and Dewey come to mind as the most famous beach destinations in Delaware.
In fact, the entire eastern border of the state touches water. Delaware Bay stretches deep into the land masses that form Southern New Jersey and Delaware and finally becomes the Delaware River.

So: plenty of water-related activities to attract people to the state — all within an hour’s drive from the western border of the state.

An Urban Destination Without all the Trappings of Other East Coast Cities

And it’s not just the charming small towns and proximity to the ocean that attracts people. The Wilmington, DE region ranks 11th in the entire country as an urban destination for Millennials. It’s also eighth in the nation for growth with an impressive migration rate of 11 per capita.

Where are they coming from? Some are bay-hopping, landing in the state after crossing the Delaware Bay from New Jersey. In fact, the out-migration of New Jersey-ites is noteworthy enough to have become something of a concern for Garden State planners and politicians. A 2018 study found that, after the NYC area and certain parts of Pennsylvania, Delaware was the top destination for both Millennials and older folks leaving the Garden State.

Chalk it up to the unpretentious charm of Wilmington’s residents, many of whom have lived there all their lives. Or maybe it’s the charm of the Trolley Square and waterfront neighborhoods. Or chalk it up the fact that when you’re in Wilmington, you’re just a morning’s train ride or drive away from several major East Coast urban centers:

  • New York City (126 miles)
  • Philadelphia (30 miles)
  • Washington D.C. (110 miles)
  • Baltimore (74 miles)
  • Newark (119 miles)

Then there’s Dover, which at half the population of Wilmington barely qualifies as urban but offers some urban charm nevertheless. Perhaps it’s because it’s home to four colleges and several large employers — plus tons of irresistibly quaint old brick buildings from the colonial era as well as its fair share or beautifully restored Victorian homes. In other words, Dover is one of the nicest places to live in Delaware.

From coastal dream towns to historic city centers, it’s not hard to find your spot in Delaware, which partly explains the positive migration the state has seen in the last decade or so.

But charm doesn’t account for everything when you’re deciding where to move. There are also a few practical considerations to keep in mind.

SALT Deductions Make Delaware an Attractive Destination

In a perfect world, taxes wouldn’t be your top concern when you’re deciding where to live. Instead, you’d be prioritizing things like the weather, proximity to friends and family, opportunity, and transportation. In fact, livability indexes like one that was published by AARP, don’t even mention taxes at all — or they roll the tax component into a general “affordability” indexing factor.

But this is the 21st century and taxes really do matter. A lot. Your tax bill can look very different from state to state, which is why it’s important to look into the tax implications before you move.

One of the largest benefits of moving to Delaware is the impact that SALT reductions can have on your tax bill.

If you haven’t been keeping up with tax law lately, here’s a quick recap of what’s been happening during the past two years or so.

Changes to state and local taxes (SALT) have been one of the most controversial tax changes of the past several years. The SALT deduction allows taxpayers (those who choose to itemize) to deduct the state individual income tax they pay, as well as the sales and property taxes they pay.

It’s worth a bundle to some taxpayers — almost everyone who itemizes takes the SALT deduction, according to the National Tax Foundation. In fact, it’s the single most important determining factor when people are deciding whether or not to itemize. In Delaware where almost a third of taxpayer itemize their deductions on their federal tax form, SALT makes quite an impact.

There is, however, a new(ish) limit: the tax code started capping SALT deductions at $10,000, starting in 2018. That inflicts financial pain on residents of nearby New York and New Jersey, who are losing thousands of dollars’ worth of tax benefits since the new caps went into place. Before those caps, the average SALT deduction taken by a taxpayer in NY or NJ was around $20,000. Unless New York dramatically changes its tax code, New Yorkers are going to end up paying billions of dollars per year in additional taxes ($14 billion per year, according to New York State figures).

In a word, in nearby states like NY and NJ, the SALT deductions are less and less valuable and caps are making tax bills higher. All of this makes Delaware a very attractive alternative for this reason alone. If you want the enjoy the full benefit of the SALT deduction, Delaware is a good place to be.

But that’s not the only tax benefit in Delaware that people find appealing.

Impressively Low Property Taxes

When this guide was first compiled, Delaware had the fourth-lowest property taxes in the nation! And of the three states that are lower than Delaware, none of them is anywhere near the East Coast. They are Hawaii, Alabama, and Louisiana.

The figures for this year have altered a bit, but Delaware still figures in the top states at position #6. Colorado and District of Columbia snuck in there with effective real estate tax rates of 0.55% (Delaware’s is 0.56% so not much of a difference there!).

So if you’re bent on remaining close to major cities in the East, Delaware would be your top choice if you were basing the decision on property taxes alone.

As for the states that surround Delaware, here’s how they rank in the nation for property tax affordability:

  • New Jersey: #51
  • New York: #43
  • Pennsylvania: #40
  • Maryland: #31
  • Connecticut: #48

As you can see, they’re all pretty much at the bottom of the list (i.e. very high property taxes)!

Favorable Tax Laws for Retirees

Not everyone is looking to maximize Social Security and pension income but for those who are, Delaware is looking pretty good. So good, in fact, that Kiplinger’s has named Delaware the best state in the nation for retirement.

For retired veterans, Delaware exempts half of your military retirement pay. There are also state educational benefits for vets who are retired, in addition to employment support.

Then there’s the tax credit equal to half of school property taxes that some retirees may be eligible for. That’s worth up to $500 (every little bit counts).

Lack of inheritance taxes for most residents is a good thing to note. In addition, the state doesn’t tax Social Security benefits. Finally, retirees of a certain age will find that Delaware tax collectors are very easy on their pension income, too, since there are limits on how much they can be taxed. This keeps the tax bill low for Boomers who relocate to Delaware.

The Lack of a Sales Tax Makes Shopping Lots More Fun

Another reason the tax man doesn’t bit quite so hard in Delaware is that there’s no sales tax on most of the retail items people typically shop for. That’s great for consumers and business owners alike. Sometimes called a Value-Added Tax (VAT), sales taxes can be as high as 10 percent and up in other states.

So shop away — and be glad you chose to live and shop Delaware.

It’s a Favorable Tax Shelter for Businesses

Delaware has long been known as a tax shelter for corporations. Anyone wishing to own a business should take note. The lack of sales tax works in your favor if you’re in the business of selling things. If you’re a Delaware holding company, there’s no corporate tax on interest (nor is there any on investment income). Gains on fixed-income investments are not taxed by Delaware, either, nor are the gains on equity investments. Business transactions are not taxed and companies with inventory will love the fact that there’s no inventory or unitary tax. That’s a double bonus because of the resources saved by not having to prepare an inventory tax statement each year!

Thinking of opening up a franchise? Delaware is kind to franchise owners, too, as far as taxes are concerned. Both franchises and LLC taxes are low — almost ridiculously low! Instead of charging a tax based on earned income, Delaware charges LLCs and franchisees a flat fee: $100 for franchisees and $250 for LLC.

There’s also a very attractive benefit to corporation shareholders, who often appreciate having their identities shielded. Delaware is a huge supporter of corporate privacy, which is why you’ll find a lot of recognizable corporate names registered in Delaware: Coca-Cola, Apple, DuPont, Sallie Mae, American Airlines, Ford, Wal-Mar, JPMorgan Chase, General Electric, Google, and Berkshire Hathaway are just some of the big names registered in the state.

Almost two-thirds of the Fortune 500 firms in the nation are Delaware corporations! And overall, more than half the nation’s publicly-traded companies are incorporated in Delaware — and likewise, half the world’s major corporations were formed in Delaware (incorporated).

This could go a long way toward explaining why the address 1209 North Orange Street, Wilmington, DE is “home” to 285,000 businesses. Actually, the reason Delaware is known as a tax haven for businesses goes way back to the late 1700s, when they created the business-friendly tax code to lure companies away from neighboring New York and New Jersey. Looks like it’s still working!

Finally, property tax law in Delaware is favorable to corporations, too, who see significant savings when they own their own office space in Delaware as opposed to owning space in other states.

More Than We Can List

If all this isn’t reason enough to at least consider Delaware as your new home, think about this: according to the livability index created by AARP every year, Delaware ranks higher than New York or New Jersey and sometimes outranks them both in several major categories:

  • Housing affordability
  • Access (zero-step access)
  • Housing cost burden
  • The high school graduation rate is better than NY
  • Proximity to parks is better than in NJ
  • Quality of health care/patient satisfaction
  • Opportunity for civic engagement
  • Voting rate

Plus, for urbanites, commutes are shorter, there’s more green space in Wilmington than your average city, festivals proliferate all summer long in Wilmington, and you’re closer to Philadelphia International Airport than even most Philadelphians!

And last but not least, there’s Dover International Speedway for NASCAR fans, some great minor league baseball action in the warmer months, and enough golf courses, cultural events, historic sites, theater shows, continuing education opportunities, boating, fishing, hiking, college sports, horse tracks, and casinos to keep everyone busy all year ‘round.

So whether you’re downsizing or seeking new job opportunities, chasing lower taxes, more picturesque landscapes, or ocean access, Delaware can be the place you call home — and feel glad you made the move.

  • Michael Kelczewski

    5701 Kennett Pike Wilmington, Delaware, 19807

    302.383.1983

    michael.kelczewski@sothebysrealty.com

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