Nebraska does have a state income tax

Nebraska taxes wages, salaries, and most other forms of income. The state uses a progressive tax system, meaning the rate increases as your income rises. Nebraska residents pay state income tax on money earned within the state and on income from out-of-state sources.

The tax applies to W-2 wages, self-employment income, investment gains, retirement distributions, and business profits. Some forms of income are excluded — Social Security benefits, for instance, are not taxed by Nebraska, and certain military pensions receive partial exemptions. But if you work in Nebraska or live there, you will owe state income tax on most earnings.

Key Takeaways

  • Nebraska's state income tax rates range from 2.84% to 6.84% depending on your income bracket and filing status.
  • Social Security benefits are not subject to Nebraska state income tax, but retirement account withdrawals and pension income usually are.
  • You file Nebraska state taxes using Form 1040N, which you submit to the Nebraska Department of Revenue along with your federal return.
  • Military retirement pay receives a partial exemption — you can exclude up to $10,000 of military pension income from state taxation.

Nebraska's income tax brackets and rates

Nebraska uses four tax brackets for single filers and four for married couples filing jointly. The brackets change each year based on inflation. For the 2024 tax year, single filers pay 2.84% on the first portion of income, then 3.57%, 5.84%, and 6.84% as income increases. Married couples filing jointly have higher income thresholds before moving into each bracket, but the same four rates apply.

The exact dollar amounts where each bracket begins shift annually. You can find the current year's brackets on the Nebraska Department of Revenue website or on your tax forms. Because the brackets adjust for inflation, your tax rate may stay the same even if your income rises slightly year to year.

What income Nebraska taxes and what it doesn't

Nebraska taxes W-2 wages, 1099 self-employment income, capital gains from stock sales, rental income, and distributions from traditional IRAs and 401(k) accounts. Interest and dividends are taxable. Gambling winnings are taxable. If you own a business or rental property in Nebraska, the profits are subject to state income tax.

Social Security retirement benefits are not taxed by Nebraska. Military retirement pay up to $10,000 per year is excluded from taxation. Certain disability payments and workers' compensation awards are also exempt. Roth IRA withdrawals are not taxed (though the earnings portion may have been taxed federally). If you receive a pension from a government employer outside Nebraska, that income is taxable in Nebraska unless you may have access to for a specific exemption.

How to file Nebraska state income tax

You file Nebraska state taxes using Form 1040N, the Nebraska Individual Income Tax Return. You submit this form to the Nebraska Department of Revenue, either by mail or electronically. Most people file their state return at the same time as their federal return, though the deadlines are the same: April 15 of the following year, or October 15 if you file for an extension.

You can file electronically through approved tax software or through a tax preparer. The Nebraska Department of Revenue maintains a list of approved e-file providers. If you file by mail, send Form 1040N and any required schedules to the address listed on the form. Keep a copy for your records.

Deductions and credits available in Nebraska

Nebraska allows a standard deduction that varies by filing status and age. For 2024, the standard deduction for single filers under 65 is $7,100, and for married couples filing jointly it is $14,200. If you are 65 or older, the standard deduction is higher. You can also itemize deductions if your itemized total exceeds the standard deduction.

Nebraska offers several tax credits that can reduce what you owe. The Earned Income Tax Credit (EITC) is available to lower-income workers and mirrors the federal credit. Nebraska also has credits for property taxes paid, dependent care expenses, and contributions to certain savings accounts. Some credits are refundable, meaning you can receive money back even if you owe no tax. Check the Nebraska Department of Revenue website or your tax forms to see which credits apply to your situation.

Who must file a Nebraska state return

You must file a Nebraska state return if your income exceeds the filing threshold for your age and filing status. For most people, this threshold is close to the federal requirement. If you are required to file a federal return, you are almost certainly required to file a Nebraska return as well. Even if you do not owe tax, filing may be worth doing if you are due a refund or if you may have access to for refundable credits like the EITC.

Nonresidents who earned income in Nebraska may also be required to file a Nebraska return on that income, even if they do not live in the state. If you worked in Nebraska for part of the year, contact the Nebraska Department of Revenue or consult a tax preparer to determine your filing obligation.

Frequently Asked Questions

Do I have to pay Nebraska income tax if I just moved there?

You owe Nebraska state income tax on income earned after you become a resident. If you moved partway through the year, you file as a part-year resident and pay tax only on income earned during the months you lived in Nebraska. You will need to report your move date when you file.

Is Social Security taxed in Nebraska?

No. Nebraska does not tax Social Security retirement benefits. However, if you have other income above certain thresholds, some of your Social Security may be taxed federally — but Nebraska will not tax any of it.

What happens if I don't file a Nebraska state return?

The Nebraska Department of Revenue can assess penalties and interest on unpaid taxes. If you owe tax and do not file, the penalty increases over time. If you are due a refund but do not file, you can claim it for up to three years, but after that the money goes to the state.

Can I deduct federal income tax paid from my Nebraska state taxes?

No. Nebraska does not allow a deduction for federal income taxes paid. You can deduct state and local property taxes up to $10,000 if you itemize deductions, but federal income tax is not deductible on your state return.

Do I owe Nebraska income tax on income earned in another state?

If you are a Nebraska resident, you owe tax on all income, including money earned out of state. However, you may be able to claim a credit for taxes paid to another state to avoid double taxation. The other state may also tax that income, so you file in both places and use the credit to offset the Nebraska tax.