Does Nebraska Tax Social Security and Retirement Income?

Nebraska has not taxed Social Security since 2024

Nebraska phased out its tax on Social Security over four years. The statute allowed 5% of benefits included in federal adjusted gross income to be subtracted for 2021, 40% for 2022, 60% for 2023 and 100% for tax years beginning on or after January 1, 2024. The 100% subtraction carries no end date and no income test. (Neb. Rev. Stat. 77-2716, Income tax; adjustments (Social Security, military retirement, Civil Service Retirement System annuities))

On the return, the amount from federal Form 1040, line 6b, is entered on Nebraska Schedule I, line 31, as an adjustment decreasing federal AGI. The instructions confirm that the entire benefit included in federal AGI can be excluded and that the former AGI threshold no longer applies. Railroad retirement benefits paid by the Railroad Retirement Board, Tier I and Tier II, are subtracted separately on line 18. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Military pay and CSRS annuities are excluded; other pensions are fully taxed

Private-employer pensions are taxed in full. Nebraska starts from federal AGI, and Schedule I, the list of adjustments that reduce it, has no line for private pension or annuity income. The same is true of Nebraska state, school and local government pensions: nothing on the schedule removes them. Pension income is taxed at the ordinary rates, which reach 4.55% in 2026. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Military retirement pay has been 100% excluded since tax year 2022, to the extent it is included in federal AGI. The exclusion covers periodic retirement payments for service in the uniformed services, which the instructions extend to the Coast Guard and the commissioned corps of the Public Health Service and NOAA. It is claimed on Schedule I, line 32. Where the Form 1099-R comes from the Office of Personnel Management, the retiree attaches documents separating military from civilian service. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

For tax years beginning on or after January 1, 2024, a retiree may also subtract annuities received under the federal Civil Service Retirement System that were earned as a federal employee. This is the only government civilian pension Nebraska excludes, and the statute names CSRS alone. (Neb. Rev. Stat. 77-2716, Income tax; adjustments (Social Security, military retirement, Civil Service Retirement System annuities))

The form instructions are explicit that annuities under the Federal Employees Retirement System (FERS) do not qualify. The first digit of the account number on Form CSA 1099-R shows the system: 0 through 4 is CSRS, 7 or 9 is FERS, and 8 is a mixed annuity for which only the CSRS portion shown on the Notice of Annuity Adjustment is subtracted, on Schedule I, line 38. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

IRA and 401(k) withdrawals and Roth conversions are taxed at ordinary rates

Withdrawals from traditional IRAs, 401(k), 403(b) and similar plans are part of federal AGI, and Schedule I has no subtraction for them at any age. They are taxed with other income on the rate schedule. A Roth conversion is included in federal AGI in the year it is made and is taxed the same way: for a household already in the top bracket, a $100,000 conversion in 2026 adds $4,550 of Nebraska tax. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Nebraska also adds its own charge when the federal return carries the additional tax on early distributions or the tax on lump-sum distributions: 29.6% of the federal amount, entered on Form 1040N, line 16. A 10% federal early-withdrawal tax of $1,000 therefore brings $296 of Nebraska “other tax”. (Neb. Rev. Stat. 77-2715.03, Individual income tax brackets and rates)

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest, dividends and capital gains are taxed as ordinary income, up to 4.55%

Nebraska has no separate rate for long-term capital gains or qualified dividends. They are in federal AGI and are taxed on the same schedule as pension income, so a $100,000 long-term gain realized by a household in the top bracket costs $4,550 in 2026. Schedule I, line 19, carries a narrow special capital gains and extraordinary dividend deduction, claimed with Form 4797N and open only to Nebraska residents. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Interest and dividends from U.S. government obligations, including the qualifying share of mutual fund and money market dividends, are subtracted on Schedule I, lines 15 and 16; capital gains on the sale of those obligations are not. Interest on bonds of other states and their local governments, exempt federally, is added back to Nebraska income, and a resident with $5,000 or more of such net adjustments must file even if no federal return is required. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Nebraska’s statute sets four brackets with rates of 2.46%, 3.51%, “rate three” and “rate four”. For tax years beginning in 2026 both of the upper rates are 4.55%, down from 5.01% and 5.20% in 2025, and for tax years beginning on or after January 1, 2027 both are 3.99%. The schedule was enacted by LB 754 in 2023. Bracket thresholds are adjusted for inflation every year. (Neb. Rev. Stat. 77-2715.03, Individual income tax brackets and rates)

The table above uses the Department of Revenue’s 2026 estimated tax rate schedule. For single filers the 2.46% rate applies to the first $4,130 of taxable income, 3.51% up to $24,760 and 4.55% above; for joint filers the thresholds are $8,250 and $49,530. The schedule still lists a fourth bracket (above $39,900 single, $79,800 joint) at the same 4.55%, so it is merged here. The final 2026 Tax Calculation Schedule for Form 1040N had not been published when this page was reviewed. (Nebraska Department of Revenue, 2026 Nebraska Individual Estimated Income Tax Payment Vouchers, Form 1040N-ES (2026 rate schedule, standard deduction, exemption credit))

The Nebraska standard deduction for 2026 is $8,850 for single filers, $17,700 for joint filers and $12,950 for heads of household, a little over half the federal amounts. It is increased for each person who is 65 or older or blind at the end of the year: $2,050 for an unmarried filer and $1,700 for each married person. A single filer of 68 deducts $10,900 and a couple both 65 or older $21,100. (Nebraska Department of Revenue, 2026 Nebraska Individual Estimated Income Tax Payment Vouchers, Form 1040N-ES (2026 rate schedule, standard deduction, exemption credit))

A filer who takes the federal standard deduction must use the Nebraska standard deduction. Those who itemize federally use the larger of the Nebraska standard deduction and federal itemized deductions less state and local income taxes. The return runs from federal AGI on line 5 to Nebraska taxable income on line 14, and nothing in it picks up the federal deduction for seniors, which is taken after AGI on the federal return. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

The table cannot show the personal exemption credit, which the calculation on this page applies. Nebraska allows a credit against the tax, not an exemption from income: $176 for each personal exemption in 2026 ($171 in 2025), so $352 for a married couple with no dependents. Estimated payments are required when the tax after this credit is expected to exceed withholding and other credits by $500 or more. (Nebraska Department of Revenue, 2026 Nebraska Individual Estimated Income Tax Payment Vouchers, Form 1040N-ES (2026 rate schedule, standard deduction, exemption credit))

The Social Security subtraction is the largest break for most retirees. In our three example households it removes $25,500, $46,750 and $59,500 of income that the federal return taxes. Alongside it, military retirees exclude all of their retirement pay and CSRS annuitants all of their annuity. (Neb. Rev. Stat. 77-2716, Income tax; adjustments (Social Security, military retirement, Civil Service Retirement System annuities))

The additional standard deduction at 65 is worth $2,050 for an unmarried filer and $1,700 for each married person in 2026. At the 4.55% rate that is about $93 and $77 of tax per person. There is no age-based exemption credit: the $176 credit is the same at every age. (Nebraska Department of Revenue, 2026 Nebraska Individual Estimated Income Tax Payment Vouchers, Form 1040N-ES (2026 rate schedule, standard deduction, exemption credit))

Retired law enforcement officers and professional firefighters who served full time for at least 20 years and are at least 60 can subtract health insurance premiums they pay, on Schedule I, line 36, provided the premiums did not already reduce federal income. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Nebraska's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

Property tax is the heaviest Nebraska tax for many retired homeowners. As a comparative figure, the Tax Foundation’s 2026 report, using 2024 Census data, puts property taxes at 1.44% of owner-occupied home value, sixth highest among the states, or about $5,760 a year on a $400,000 home. Its county figures show 1.62% in Douglas County (Omaha), 1.43% in Lancaster County (Lincoln) and 1.72% in Sarpy County. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

The homestead exemption is the main relief for owners 65 or older, and it is means-tested. The applicant must be 65 before January 1 of the application year, own and occupy the home from January 1 through August 15, and file Form 458 and its Schedule I income statement with the county assessor between February 2 and June 30 every year. Household income is the prior year’s federal AGI plus Social Security and railroad retirement not already in it, less medical expenses above 4% of income. Pensions, IRA withdrawals, interest and capital gains all count. (Nebraska Department of Revenue, Nebraska Homestead Exemption Information Guide (February 2026))

For 2026 applications, based on 2025 income, a single owner 65 or older receives 100% relief with household income up to $37,000.99, stepping down by ten points per band to 10% at $52,401 to $54,300.99 and nothing at $54,301 or more. For married or closely related owners, full relief runs to $43,400.99 and ends at $64,501. (Nebraska Department of Revenue, 2026 Homestead Exemption Household Income Table)

The amount exempted is capped by county. For 2026 the maximum exempt value in the age category is the county’s certified average residential value: $302,282 in Douglas County, $333,050 in Lancaster and $344,147 in Sarpy. The home itself must be worth less than a maximum value of twice that average, $604,564, $666,100 and $688,294 in those counties. (Nebraska Department of Revenue, 2026 Average Residential Value, Maximum Exemption and Maximum Value, all counties)

At or above the maximum value the exemption is cut by 10% for each $2,500 of excess and is lost altogether at $20,000 over. A homestead that received the exemption the previous year while under the maximum value keeps its eligibility when a later valuation rises above it, unless the increase comes from improvements. (Neb. Rev. Stat. 77-3506.03, Homestead exemption; exempt amount; reduction; continued eligibility)

Two state-funded credits appear on every property tax statement without an application. For tax year 2026 the Real Property Tax Credit is $118.87 per $100,000 of taxable value on non-agricultural property, about $475 on a $400,000 home. The School District Property Tax Relief Credit distributes $809.5 million for 2026-2027 against school district taxes. Both are shown as credits after the full taxes levied. (Nebraska Department of Revenue, Real Property Tax Credit and School District Property Tax Relief Credit for Tax Year 2026 (September 15, 2026))

The school credit was established at $750 million for fiscal year 2024-2025, with intended appropriations of $808 million for 2026-2027, $838 million for 2027-2028 and 3% annual growth after 2030-2031. It does not reach school taxes levied for bonds or for voter-approved levy overrides. A homestead exemption recipient also receives it on any remaining school tax. (Nebraska Department of Revenue, Directive 25-4, School District Property Tax Relief Credit and Tax Statement Calculations)

The state sales and use tax rate is 5.5%. Cities and villages add local rates of 0.5% to 2%, so the Department’s rate cards run from 5.5% to 7.5%. From July 1, 2026 the combined rate is 7% in Omaha, Bellevue and Kearney, 7.25% in Lincoln and 7.5% in Grand Island and Gretna. Dakota County adds a 0.5% county tax on sales made outside a municipality that has its own local rate. (Nebraska Department of Revenue, Local Sales and Use Tax Rates, effective July 1, 2026)

As a comparative figure, the Tax Foundation puts Nebraska’s average combined state and local rate at 6.98% as of January 1, 2026, 27th among the states. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

Food and food ingredients for human consumption are exempt, apart from prepared food and food sold through vending machines. Insulin and prescription medicines are exempt, along with durable medical equipment, home medical supplies, mobility-enhancing equipment, prosthetic devices and oxygen equipment sold under a prescription. (Nebraska Department of Revenue: Nebraska Sales Tax Exemptions)

Nebraska has no estate tax: the statute imposes one only for decedents dying before January 1, 2007, and describes it as an addition to the inheritance taxes. The inheritance tax remains in force. Its rate and exemption depend on each heir’s relationship to the person who died, and the figures below apply to deaths on or after January 1, 2023. (Neb. Rev. Stat. 77-2101.01, Estate tax; amount (decedents dying before January 1, 2007))

Close relatives pay 1% of what each receives above $100,000. This class covers parents, grandparents, siblings, children and other lineal descendants, including those legally adopted, and the spouses of those relatives. Everything passing to a surviving spouse is exempt, and so is any interest passing to a beneficiary under 22. (Neb. Rev. Stat. 77-2004, Inheritance tax; rate; transfer to immediate relatives; exemption)

Aunts, uncles, nieces and nephews related by blood or adoption, their descendants and their spouses pay 11% of the amount each receives above $40,000. A niece who inherits $500,000 owes $50,600. (Neb. Rev. Stat. 77-2005, Inheritance tax; rate; transfer to remote relatives; exemption)

All other beneficiaries, such as friends, unmarried partners and more distant relatives, pay 15% above $25,000. A $500,000 bequest to a friend carries $71,250 of tax, against $4,000 if the same amount went to a child. (Neb. Rev. Stat. 77-2006, Inheritance tax; rate; other transfers; exemption)

The tax is determined in the county court and is due 12 months after the date of death. After that interest runs, and failing to start a proceeding within 12 months adds a penalty of 5% a month, up to 25% of the unpaid tax. The court may abate the penalty for good cause. (Neb. Rev. Stat. 77-2010, Inheritance tax; when due; interest; penalty)

The state does not keep this tax. Inheritance tax money is collected by each county and credited, by resolution of the county board, to the county general fund or to another county fund. (Neb. Rev. Stat. 77-2032, Inheritance tax; how credited)

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

The last scheduled step of the income tax cut arrives in 2027, when rates three and four fall from 4.55% to 3.99%. As published on November 14, 2026 the statute still carries that step, with LB 754 of 2023 as its most recent amendment. (Neb. Rev. Stat. 77-2715.03, Individual income tax brackets and rates)

A bill to change the inheritance tax, LB 468, reached the second round of floor debate in 2025, where a cloture motion failed on May 13. It carried over to the 2026 session and was indefinitely postponed on April 17, 2026. The rates and exemptions in force since 2023 are unchanged. (Nebraska Legislature, LB 468 (109th Legislature), inheritance taxes: bill history)

The 2026 session made smaller changes. LB 838 clarified the definition of Class I inheritance tax beneficiaries and allows a certificate of trust as proof that a trust qualifies as a homestead owner. From January 1, 2027, LB 803 requires a two-thirds vote of a local governing body (four-sevenths for seven-member boards) to set a property tax request above the prior year’s, and adds budget hearing information to valuation notices. (Nebraska Department of Revenue: 2026 Nebraska Legislative Changes)

No property tax or inheritance tax measure was on the statewide ballot on November 3, 2026. The Secretary of State lists three initiative measures, two on online sports wagering (440 and 441) and one on school athletics (442), and one constitutional amendment proposed by the Legislature, LR19CA, which would raise the term limit for state legislators from two consecutive four-year terms to three. (Nebraska Secretary of State, Elections: initiatives 440, 441 and 442 and legislative constitutional amendment LR19CA on the 2026 general election ballot (pamphlet and approved ballot statement))

A Nebraska resident is a person domiciled in the state, or a person who maintains a permanent place of abode in Nebraska and is present for more than six months of the year. The Department applies this as 183 days, counting any part of a day, and a person who meets it is a resident even if domiciled elsewhere. A permanent place of abode is a dwelling the person maintains, owned or not, including one used for vacations, but not a camp or cottage occupied only temporarily. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Domicile, once established, continues until it is abandoned: the person must leave with no intention of keeping a permanent home in Nebraska and establish a domicile in another state. A retiree who keeps a Nebraska house and spends 183 days in it remains a resident, taxable on all income, whatever a second state’s records show. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

A partial-year resident is someone who changed domicile during the year. Partial-year residents and nonresidents report total federal AGI on Form 1040N and complete Schedule III, which prorates the tax by the ratio of Nebraska income to total income. The personal exemption credit is claimed on that schedule. (Nebraska Department of Revenue, 2025 Nebraska Individual Income Tax Booklet (Form 1040N, Schedules I, II and III, Form PTC and instructions))

Federal law (4 U.S.C. 114) bars a state from taxing the retirement income of a person who is not its resident or domiciliary. A pension or 401(k) earned in Nebraska is not taxed by Nebraska once the retiree is established in another state, and one earned elsewhere becomes taxable by Nebraska when the retiree moves in. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)