Kate Schubel
Navigating the complexities of state taxes can be daunting, but understanding Nebraska's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of the Cornhusker State's tax system, from income and sales taxes to property taxes and retirement benefits.
Nebraska state tax: Overview
Nebraska’s tax setup can be considered somewhat challenging for homeowners, with property taxes exceeding the national average. The state also has an inheritance tax that applies to many types of heirs, which can catch some families off guard.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But it’s not all bad news. Some residents saw a drop in their income taxes in 2024, thanks to a gradual reduction in the state’s top rate that will continue through 2027.
While Nebraska has its tax challenges, there are some changes underway that could offer relief.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
Nebraska income taxes
Nebraska has a graduated state individual income tax rate ranging from 2.46% to 5.84%.
Nebraska retirement taxes
Nebraska tax on retirement income: The state no longer taxes Social Security retirement benefits.
Military retirement income and Railroad Retirement benefits are tax-exempt.
Tax on taxable income: A low of 2.46% (on up to $2,999 for single filers and $5,999 for joint filers) and a high of 5.84% (on $29,000 or more for single filers and $58,000 or more for joint filers)
- Social Security: Not taxable
- Pensions: Taxable (Military retirement pay is exempt)
- 401(k) and IRA distributions: Taxable
Nebraska sales tax
Nebraska has a 5.5% state sales tax rate. Localities can add as much as 1.47%, and the average combined rate is 6.97%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Taxable
- Prescription drugs: Taxable
- Women's menstrual products: Exempt
- Diapers: Exempt
*Note: Legislation passed in May 2024 enacts a sales tax exemption for diapers effective July 1, 2027.
How much are property taxes in Nebraska?
The average effective property tax rate is 1.43%, which is higher than in most states.
Nebraska Property Tax Breaks for Retirees
Homestead Exemption: Nebraska homeowners 65 and older and those with disabilities might qualify for homestead exemption. The income thresholds for homeowners 65 and older and those who qualify based on disability status differ.
Nebraska residents can view the Homestead Exemption Information Guide (PDF) to see if they qualify.
Nebraska gas taxes
Gasoline | 27 cents per gallon |
Gasoline | 27 cents per gallon |
Source: Sales Tax Handbook
Nebraska taxes on alcohol and tobacco
Product | Tax Amount |
|---|---|
Cigarettes | 64 cents per pack |
Other tobacco products | 20% of wholesale price |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Wine | 95 cents per gallon |
Beer | 31 cents per gallon |
Liquor | $3.75 per gallon |
Source: Sales Tax Handbook
Nebraska estate and inheritance taxes
Nebraska is one of the six states with an inheritance tax. Spouses are off the hook from paying, but other heirs could get a hefty tax bill.
- Children, parents, grandchildren, siblings and grandparents are subject to a 1% tax on inheritances of more than $100,000.
- Aunts, uncles, nieces and nephews pay an 11% tax on inheritances of more than $40,000.
- Other heirs are responsible for a 15% inheritance tax on amounts of more than $25,000.
Related Content
-
Stocks Bounce But End With Big Weekly Losses: Stock Market TodayThe stock market rout continued on Friday, but a late-day burst of buying power brought the main indexes off their session lows.
-
More Than 1 Million Toyota, Lexus and Subaru Vehicles Recalled for Camera Issue. Is Your Vehicle Affected?A software glitch in the Panoramic View Monitor system causes blank or frozen rear-camera images, triggering a massive recall of 2022-26 models.
-
Ten Retirement Tax Plan Moves to Make Before December 31Retirement Taxes Proactively reviewing your health coverage, RMDs, and IRAs can lower retirement taxes in 2025 and 2026. Here’s how.
-
IRS Updates Capital Gains Tax Thresholds for 2026: Here’s What’s NewCapital Gains The IRS has increased the capital gains tax income thresholds for 2026. You'll need this information to help minimize your tax burden.
-
When to Hire a Tax Pro: The Age Most Americans Switch to a CPATax Tips Taxpayers may outsource their financial stress by a specific age. Find out when you should hire a tax preparer.
-
The Original Property Tax Hack: Avoiding The ‘Window Tax’Property Taxes Here’s how homeowners can challenge their home assessment and potentially reduce their property taxes — with a little lesson from history.
-
Social Security Tax Limit Rises Again: Who Pays More in 2026?Payroll Taxes The Social Security Administration has announced significant changes affecting millions as we approach a new year.
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
Trump’s 2025 Tax Bill: What’s Changing and How It Affects Your TaxesTax Law From standard deduction amounts to tax brackets and Medicaid cuts, here’s what individual filers need to know about tax changes in Trump's so called "big beautiful bill."
-
The Rubber Duck Rule of Retirement Tax PlanningRetirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think.
