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Tool | October 2015

State-by-State Guide to Taxes on Retirees

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Nebraska

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The Bottom Line
Map of Nebraska

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Cornhusker State offers little in the way of tax breaks to retirees. For 2015, new rules have kicked in that will spare some residents from paying tax on their Social Security benefits and a new break for military retirees takes effect. Income tax rates were lowered slightly in 2013, and changes in tax bracket thresholds in 2014 lowered tax bills slightly, too. 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 $29,460 for single filers and $58,920 for married couples filing jointly)

Social Security

As of 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

Railroad Retirement benefits are tax-exempt. No special breaks for nonmilitary retirement income. All government pensions, including those from out-of-state, are taxable to Nebraska residents. As of 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.

IRAs

Taxable at ordinary income tax rates.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

No special breaks for nonmilitary retirement income. All government pensions, including those from out-of-state, are taxable to Nebraska residents. As of 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

A property tax credit is provided for all real property based on value. The credit for 2015 is $71.54 for each $100,000 in value.

Median property tax on Nebraska's median home value of $132,700 is $2,438, 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 $27,300 and married filers earning less than $32,000 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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