diff --git a/changelog.d/fix-de-military-pension-cap-2027.fixed.md b/changelog.d/fix-de-military-pension-cap-2027.fixed.md
new file mode 100644
index 00000000000..ee481f85fb5
--- /dev/null
+++ b/changelog.d/fix-de-military-pension-cap-2027.fixed.md
@@ -0,0 +1 @@
+Raise Delaware's military pension exclusion cap to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029, let filers age 60 or older take the greater of the $12,500 pension exclusion and the military pension exclusion from 2027, and apply the domicile requirement for filers 60 or older from 2027, under 30 Del. C. § 1106(b)(3) as 85 Del. Laws c. 426 amended it.
diff --git a/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/cap/military.yaml b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/cap/military.yaml
index d10e75fcaa0..a0001a21a34 100644
--- a/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/cap/military.yaml
+++ b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/cap/military.yaml
@@ -1,6 +1,11 @@
 description: Delaware caps the military pension income exclusion at this amount.
 values:
+  # 30 Del. C. 1106(b)(3)b, for 2022 through 2026.
   2022-01-01: 12_500
+  # 1106(b)(3)c, d and e.
+  2027-01-01: 15_000
+  2028-01-01: 20_000
+  2029-01-01: 25_000
 metadata:
   unit: currency-USD
   period: year
@@ -17,5 +22,7 @@ metadata:
       href: https://revenuefiles.delaware.gov/2022/PIT-RES_TY22_2022-02_Instructions.pdf#page=6
     - title: The Delaware Code - Title 30 - Chapter 11 - Subchapter II - § 1106 - (b) - (3)
       href: https://delcode.delaware.gov/title30/c011/sc02/index.html
+    - title: 30 Del. C. § 1106(b)(3)c-e, military pension caps for 2027, 2028 and 2029 on
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html
     - title: Delaware Individual Income Tax Return Line 6
       href: https://revenuefiles.delaware.gov/2023/PIT-RES_TY23_2023-01_Instructions.pdf#page=6
diff --git a/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/domicile_requirement_applies.yaml b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/domicile_requirement_applies.yaml
new file mode 100644
index 00000000000..bcf3e17ea77
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/domicile_requirement_applies.yaml
@@ -0,0 +1,19 @@
+description: Delaware limits the pension exclusion for filers at or above the age threshold to those who meet its domicile requirement, if this is true.
+values:
+  2007-01-01: false
+  # 30 Del. C. 1106(b)(3)f.4, added by 85 Del. Laws c. 426 (Senate Bill 219
+  # with Senate Amendment 1). The act took effect when the Governor signed it
+  # on August 17, 2026 and names no first tax year for this rule; its fiscal
+  # note applies the act from tax year 2027.
+  2027-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Delaware pension exclusion domicile requirement applies
+  reference:
+    - title: 30 Del. C. § 1106(b)(3)f.4
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html
+    - title: Senate Amendment 1 to Senate Bill 219, 153rd General Assembly
+      href: https://legis.delaware.gov/json/BillDetail/GenerateHtmlDocument?legislationId=143006&legislationTypeId=5&docTypeId=2&legislationName=SA1
+    - title: Senate Bill 219 fiscal note, assumption 1
+      href: https://legis.delaware.gov/json/BillDetail/GetPdfDocument?fileAttachmentId=653814#page=1
diff --git a/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/military_retirement_exclusion_available_at_age_threshold.yaml b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/military_retirement_exclusion_available_at_age_threshold.yaml
new file mode 100644
index 00000000000..728c55d75c9
--- /dev/null
+++ b/policyengine_us/parameters/gov/states/de/tax/income/subtractions/exclusions/pension/military_retirement_exclusion_available_at_age_threshold.yaml
@@ -0,0 +1,15 @@
+description: Delaware lets filers at or above the pension exclusion age threshold take the greater of the pension exclusion and the military pension exclusion, if this is true.
+values:
+  # 30 Del. C. 1106(b)(3)b.2: for 2022 through 2026, filers age 60 or older
+  # exclude up to $12,500 of pensions and eligible retirement income.
+  2022-01-01: false
+  # 1106(b)(3)c.2, d.2 and e.2: from 2027 they exclude the greater of that
+  # amount and their United States military pension, up to the military cap.
+  2027-01-01: true
+metadata:
+  unit: bool
+  period: year
+  label: Delaware military pension exclusion available at or above the age threshold
+  reference:
+    - title: 30 Del. C. § 1106(b)(3)b-e
+      href: https://delcode.delaware.gov/title30/c011/sc02/index.html
diff --git a/policyengine_us/tests/core/test_de_military_pension_exclusion_properties.py b/policyengine_us/tests/core/test_de_military_pension_exclusion_properties.py
new file mode 100644
index 00000000000..f9c66ceb46a
--- /dev/null
+++ b/policyengine_us/tests/core/test_de_military_pension_exclusion_properties.py
@@ -0,0 +1,139 @@
+"""Properties of Delaware's pension exclusion for military pensions, 2022-2031.
+
+30 Del. C. 1106(b)(3) subtracts, for 2022 through 2026, the greater of
+pensions up to $2,000 and a United States military pension up to $12,500 for
+a person under 60, and pensions and eligible retirement income up to $12,500
+for a person 60 or older. For 2027, 2028 and from 2029 ((b)(3)c, d and e) the
+military cap is $15,000, $20,000 and $25,000, and a person 60 or older takes
+the greater of the $12,500 exclusion and the military pension up to that cap.
+From 2027 ((b)(3)f.4), a person 60 or older who fails the domicile requirement
+gets no subtraction.
+
+The reference below restates those rules from the statute, not from the
+model's parameters. Hypothesis draws batches of single filers (any age;
+military retired pay, survivor benefits, other pensions, IRA distributions,
+interest, capital gains or losses, and the domicile requirement), runs each
+batch as one simulation with the same inputs in every year, and checks for
+every filer and year:
+
+1. The exclusion equals the reference amount.
+2. It is never negative and never exceeds the military pension plus the
+   pension basket floored at zero.
+3. From 2027, a filer 60 or older who meets the domicile requirement never
+   gets less than the 2026 rule gives.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_us import Simulation
+
+YEARS = tuple(range(2022, 2032))
+MILITARY_CAP = {2027: 15_000, 2028: 20_000}
+
+
+def military_cap(year):
+    if year <= 2026:
+        return 12_500
+    return MILITARY_CAP.get(year, 25_000)
+
+
+def basket(filer):
+    """Pensions and eligible retirement income, with the $3,000 loss limit."""
+    gains = max(filer["long_term_capital_gains"], -3_000)
+    return (
+        filer["military_retirement_pay"]
+        + filer["military_retirement_pay_survivors"]
+        + filer["taxable_pension_income"]
+        + filer["taxable_ira_distributions"]
+        + filer["taxable_interest_income"]
+        + gains
+    )
+
+
+def reference(year, filer):
+    military = min(military_cap(year), filer["military_retirement_pay"])
+    if (
+        year >= 2027
+        and filer["age"] >= 60
+        and not filer["de_pension_exclusion_domicile_requirement_met"]
+    ):
+        return 0
+    if filer["age"] < 60:
+        pensions = (
+            filer["taxable_pension_income"]
+            + filer["military_retirement_pay"]
+            + filer["military_retirement_pay_survivors"]
+        )
+        return max(min(2_000, max(pensions, 0)), military)
+    general = min(12_500, max(basket(filer), 0))
+    if year <= 2026:
+        return general
+    return max(general, military)
+
+
+filers = st.fixed_dictionaries(
+    {
+        "age": st.integers(30, 90),
+        "military_retirement_pay": st.sampled_from(
+            [0, 1_000, 12_500, 15_000, 18_000, 20_000, 25_000, 40_000]
+        ),
+        "military_retirement_pay_survivors": st.sampled_from([0, 3_000]),
+        "taxable_pension_income": st.sampled_from([0, 1_500, 20_000]),
+        "taxable_ira_distributions": st.sampled_from([0, 5_000, 20_000]),
+        "taxable_interest_income": st.sampled_from([0, 2_000]),
+        "long_term_capital_gains": st.sampled_from([-10_000, -2_000, 0, 4_000]),
+        "de_pension_exclusion_domicile_requirement_met": st.booleans(),
+    }
+)
+
+
+def simulate(batch):
+    people, tax_units, households = {}, {}, {}
+    groups = {"marital_units": {}, "spm_units": {}, "families": {}}
+    for i, filer in enumerate(batch):
+        name = f"filer_{i}"
+        people[name] = {k: {y: v for y in YEARS} for k, v in filer.items()}
+        tax_units[f"tax_unit_{i}"] = {
+            "members": [name],
+            "filing_status": {y: "SINGLE" for y in YEARS},
+        }
+        households[f"household_{i}"] = {
+            "members": [name],
+            "state_code": {y: "DE" for y in YEARS},
+        }
+        for group in groups:
+            groups[group][f"{group}_{i}"] = {"members": [name]}
+    return Simulation(
+        situation={
+            "people": people,
+            "tax_units": tax_units,
+            "households": households,
+            **groups,
+        }
+    )
+
+
+@settings(
+    max_examples=6,
+    deadline=None,
+    derandomize=True,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+@given(batch=st.lists(filers, min_size=10, max_size=30))
+def test_military_pension_exclusion(batch):
+    simulation = simulate(batch)
+    for year in YEARS:
+        exclusion = np.asarray(simulation.calculate("de_pension_exclusion", year))
+        for filer, amount in zip(batch, exclusion):
+            assert amount == reference(year, filer), (year, filer, amount)
+            assert (
+                0 <= amount <= filer["military_retirement_pay"] + max(basket(filer), 0)
+            )
+            if (
+                year >= 2027
+                and filer["age"] >= 60
+                and filer["de_pension_exclusion_domicile_requirement_met"]
+            ):
+                assert amount >= reference(2026, filer)
diff --git a/policyengine_us/tests/policy/baseline/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.yaml b/policyengine_us/tests/policy/baseline/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.yaml
index 935d7bd10f1..a18acdbd733 100644
--- a/policyengine_us/tests/policy/baseline/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.yaml
@@ -153,3 +153,226 @@
     state_code: DE
   output:
     de_pension_exclusion: 12_500
+
+# 30 Del. C. 1106(b)(3)c-e: the military pension cap rises to $15,000 for
+# 2027, $20,000 for 2028 and $25,000 from 2029, and from 2027 filers age 60 or
+# older take the greater of the $12,500 pension exclusion and the military
+# pension exclusion.
+
+- name: DE under-60 military pension cap stays $12,500 in 2026.
+  period: 2026
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 12_500
+
+- name: DE under-60 military pension cap is $15,000 in 2027.
+  period: 2027
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 15_000
+
+- name: DE under-60 military pension cap is $20,000 in 2028.
+  period: 2028
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 20_000
+
+- name: DE under-60 military pension cap is $25,000 in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 25_000
+
+- name: DE under-60 military pension cap stays $25,000 after 2029.
+  period: 2031
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 25_000
+
+- name: DE military pension under the cap is excluded in full in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 18_000
+  output:
+    de_pension_exclusion: 18_000
+
+- name: DE 60+ filer excludes $12,500 of military pension in 2026.
+  period: 2026
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 12_500
+
+- name: DE 60+ filer takes the $15,000 military pension exclusion in 2027.
+  period: 2027
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 15_000
+
+- name: DE 60+ filer takes the $25,000 military pension exclusion in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 30_000
+  output:
+    de_pension_exclusion: 25_000
+
+- name: DE 60+ filer keeps the $12,500 pension exclusion when it is larger in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 10_000
+    taxable_ira_distributions: 20_000
+  output:
+    # The greater of min(12,500, 30,000) and min(25,000, 10,000).
+    de_pension_exclusion: 12_500
+
+- name: DE 60+ filer without military pension keeps the $12,500 cap in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 65
+    taxable_pension_income: 30_000
+  output:
+    de_pension_exclusion: 12_500
+
+- name: DE 60+ filer with a capital loss takes military pension alone from 2027.
+  period: 2027
+  input:
+    state_code: DE
+    age: 75
+    military_retirement_pay: 10_000
+    long_term_capital_gains: -3_000
+  output:
+    # The basket nets to 7,000; the military pension exclusion gives 10,000.
+    de_pension_exclusion: 10_000
+
+- name: DE 60+ filer with a capital loss keeps the netted basket in 2026.
+  period: 2026
+  input:
+    state_code: DE
+    age: 75
+    military_retirement_pay: 10_000
+    long_term_capital_gains: -3_000
+  output:
+    de_pension_exclusion: 7_000
+
+- name: DE under-60 survivor benefits stay in the $2,000 pension exclusion in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 50
+    military_retirement_pay_survivors: 30_000
+  output:
+    de_pension_exclusion: 2_000
+
+- name: DE joint return gives each spouse the 2029 cap on their own military pension.
+  period: 2029
+  input:
+    people:
+      head:
+        age: 65
+        military_retirement_pay: 30_000
+      spouse:
+        age: 58
+        military_retirement_pay: 22_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        filing_status: JOINT
+    households:
+      household:
+        members: [head, spouse]
+        state_code: DE
+  output:
+    de_pension_exclusion: [25_000, 22_000]
+
+# 30 Del. C. 1106(b)(3)f.4 (85 Del. Laws c. 426, Senate Amendment 1): from
+# 2027, a person 60 or older claims the subtraction only after 3 years of
+# Delaware domicile, or 5 years for a person domiciled in Delaware from 2027.
+
+- name: DE 60+ filer who fails the domicile requirement gets no exclusion in 2027.
+  period: 2027
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 30_000
+    de_pension_exclusion_domicile_requirement_met: false
+  output:
+    de_pension_exclusion: 0
+
+- name: DE domicile requirement also removes the 60+ pension exclusion in 2029.
+  period: 2029
+  input:
+    state_code: DE
+    age: 70
+    taxable_ira_distributions: 20_000
+    de_pension_exclusion_domicile_requirement_met: false
+  output:
+    de_pension_exclusion: 0
+
+- name: DE domicile requirement does not apply in 2026.
+  period: 2026
+  input:
+    state_code: DE
+    age: 65
+    military_retirement_pay: 30_000
+    de_pension_exclusion_domicile_requirement_met: false
+  output:
+    de_pension_exclusion: 12_500
+
+- name: DE domicile requirement does not apply under 60.
+  period: 2027
+  input:
+    state_code: DE
+    age: 45
+    military_retirement_pay: 30_000
+    de_pension_exclusion_domicile_requirement_met: false
+  output:
+    de_pension_exclusion: 15_000
+
+- name: DE joint return applies the domicile requirement to each spouse.
+  period: 2029
+  input:
+    people:
+      head:
+        age: 65
+        military_retirement_pay: 30_000
+        de_pension_exclusion_domicile_requirement_met: false
+      spouse:
+        age: 62
+        military_retirement_pay: 22_000
+    tax_units:
+      tax_unit:
+        members: [head, spouse]
+        filing_status: JOINT
+    households:
+      household:
+        members: [head, spouse]
+        state_code: DE
+  output:
+    de_pension_exclusion: [0, 22_000]
diff --git a/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.py b/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.py
index a1d22553862..4efc909831c 100644
--- a/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.py
+++ b/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion.py
@@ -10,6 +10,7 @@ class de_pension_exclusion(Variable):
     reference = (
         "https://revenuefiles.delaware.gov/2022/PIT-RES_TY22_2022-02_Instructions.pdf#page=6",
         "https://delcode.delaware.gov/title30/c011/sc02/index.html",
+        "https://revenuefiles.delaware.gov/2025/PITForms_Instructions/Instructions/PIT-RES_Instructions_2025-01.pdf#page=6",
     )
     defined_for = StateCode.DE
 
@@ -59,15 +60,33 @@ def formula(person, period, parameters):
             capped_military_retirement_pay = min_(
                 p.cap.military, military_retirement_pay
             )
-            younger_amount = max_(
+            # Filers under the age threshold take the greater of the pension
+            # exclusion and the military pension exclusion from 2022
+            # (30 Del. C. 1106(b)(3)b.1), and filers at or above it from 2027
+            # (1106(b)(3)c.2, d.2 and e.2).
+            greater_amount = max_(
                 capped_military_retirement_pay, capped_eligible_pension_income
             )
-            # Filers under the age threshold, post 2022, can subtract their military retirement
-            # income which is capped at a larger amount
-            return where(
+            if p.military_retirement_exclusion_available_at_age_threshold:
+                older_amount = greater_amount
+            else:
+                older_amount = capped_eligible_pension_income
+            exclusion = where(
                 eligible_for_pension_exclusion_income,
-                capped_eligible_pension_income,
-                younger_amount,
+                older_amount,
+                greater_amount,
             )
         else:
-            return capped_eligible_pension_income
+            exclusion = capped_eligible_pension_income
+        if p.domicile_requirement_applies:
+            # A person at or above the age threshold claims the exclusion only
+            # after 3 years of Delaware domicile, or 5 years for a person
+            # domiciled in Delaware from 2027 (30 Del. C. 1106(b)(3)f.4).
+            meets_domicile_requirement = person(
+                "de_pension_exclusion_domicile_requirement_met", period
+            )
+            older_exclusion = where(meets_domicile_requirement, exclusion, 0)
+            return where(
+                eligible_for_pension_exclusion_income, older_exclusion, exclusion
+            )
+        return exclusion
diff --git a/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion_domicile_requirement_met.py b/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion_domicile_requirement_met.py
new file mode 100644
index 00000000000..067039dd76e
--- /dev/null
+++ b/policyengine_us/variables/gov/states/de/tax/income/subtractions/pension_exclusion/de_pension_exclusion_domicile_requirement_met.py
@@ -0,0 +1,22 @@
+from policyengine_us.model_api import *
+
+
+class de_pension_exclusion_domicile_requirement_met(Variable):
+    value_type = bool
+    entity = Person
+    label = "Meets Delaware's domicile requirement for the pension exclusion at age 60 or older"
+    documentation = (
+        "Whether this person has lived in Delaware long enough to claim the "
+        "pension exclusion at age 60 or older: at least 3 years of Delaware "
+        "domicile for a person domiciled in Delaware before January 1, 2027, "
+        "and at least 5 years for one domiciled there on or after that date. "
+        "A person counts as domiciled in Delaware while a resident individual "
+        "under 30 Del. C. 1103. PolicyEngine assumes the requirement is met "
+        "unless this input says otherwise."
+    )
+    definition_period = YEAR
+    default_value = True
+    reference = (
+        "https://delcode.delaware.gov/title30/c011/sc02/index.html",
+        "https://legis.delaware.gov/json/BillDetail/GenerateHtmlDocument?legislationId=143006&legislationTypeId=5&docTypeId=2&legislationName=SA1",
+    )