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Tool | September 2014

State-by-State Guide to Taxes on Retirees

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The Bottom Line
Map of Nebraska


One of Kiplinger's top ten least tax-friendly states for retirees, the Cornhusker State doesn't offer any great tax breaks to retirees. For 2014, Social Security benefits are taxed to the same extent that they are on your federal return, but new rules starting in 2015 will spare some residents from paying tax on their benefits. Income tax rates were lowered slightly in 2013, and changes in tax bracket thresholds in 2014 will lower tax bills slightly, too. Residential real estate is assessed at 100% of fair market value. Seniors may qualify for a homestead exemption on property taxes.

State Sales Tax

5.5%. Food and prescription drugs are exempt. Local option taxes can add an additional 2% to the state rate.

Income Tax Range

Low: 2.46% (on up to $3,000 of taxable income for single filers and $6,000 for married couples filing jointly)

High: 6.84% (on taxable income over $29,000 for single filers and $58,000 for married couples filing jointly)

Social Security

For 2014, Social Security benefits are taxed to the same extent that they are on the federal return. But starting in 2015, a taxpayer may subtract Social Security income included in federal adjusted gross income if a taxpayer’s federal adjusted gross income is less than or equal to $58,000 for married couples filing jointly, or $43,000 for all other filers.

Exemptions for Other Retirement Income

No special breaks for nonmilitary retirement income. All government pensions, including those from out-of-state, are taxable to Nebraska residents. Starting in 2015, military retirees may make a one-time election within two calendar years after the date of his or her retirement from the military. A military retiree can choose to exclude 40% of his or her military retirement benefit income for seven consecutive taxable years or can exclude 15% of military retirement benefit income for all taxable years beginning with the year the retiree turns 67.

Property Taxes

Real estate is assessed at 100% of its market value, except for agricultural land, which is assessed at 75% of market value. Property taxes are determined by multiplying the property’s taxable value by the total consolidated tax rate for the tax district in which the property is located. The tax district is composed of various governing bodies empowered to levy property taxes for services, such as county government, school district and city. The tax rates are expressed as $1 per $100 of taxable value and vary depending on the governing bodies at the property location.

A property tax credit is provided for all real property based on value. The credit for 2013 and 2014 is $80.42 for each $100,000 in value.

Median property tax on the state's median home value of $123,300 is $2,164, according to the Tax Foundation.

Tax breaks for seniors: People over age 65 who own and occupy their residence from January 1 through August 15 and meet income restrictions qualify for a homestead exemption that exempts all or a portion of a property’s value from taxation. Single filers earning less than $26,900 and married filers earning less than $31,600 qualify for the maximum exemption of the taxable value of their homestead, up to $40,000 or 100% of the county's average assessed value of single-family residential properties, whichever is greater.

Inheritance and
Estate Taxes

There is no estate tax. Nebraska's inheritance tax is a local tax administered by counties and ranges from 1% to 18%; assets passing to a spouse or charity are exempt from inheritance taxes.


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