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
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
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
-
Original Medicare vs Medicare Advantage Quiz: Which is Right for You?Quiz Take this quick quiz to discover your "Medicare Personality Type" and learn whether you are a Traditionalist, or a Bundler.
-
Ask the Editor: Capital Gains and Tax PlanningAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on capital gains tax rates and end-of-year tax planning
-
Time Is Running Out to Make the Best Tax Moves for 2025Don't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
Are You Middle-Class? Here's The Most Tax-Friendly State For Your FamilyTax Tips We found the state with no income tax, low property tax bills, and exemptions on groceries and medicine.
-
Social Security Benefits Quiz : Do You Know the IRS Tax Rules?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
How Are I Bonds Taxed? 8 Common Situations to KnowBonds Series I U.S. savings bonds are a popular investment, but the federal income tax consequences are anything but straightforward.
-
New 2026 Tax Change Could Mean More for Your IRA and 401(k) SavingsRetirement Savings Here's how the new IRS inflation adjustments will increase the contribution limits for your 401(k) and IRA in the new year.
-
Capital Gains Tax Quiz: How Well Do You Really Know IRS Investment Tax Rules?Quiz Take our capital gains tax quiz to test your investment taxes knowledge. Learn about loss rules, holding periods, and tax incentives that could impact your savings.
-
6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't)Retirement Taxes Here’s how converting your traditional retirement account to a Roth IRA can boost your nest egg — but avoid these costly scenarios.
-
Could Tax Savings Make a 50-Year Mortgage Worth It?Buying a Home The 50-year mortgage proposal by Trump aims to address the housing affordability crisis with lower monthly mortgage payments. But what does that mean for your taxes?
-
3 Ways High-Income Earners Can Maximize Their Charitable Donations in 2025Tax Deductions New charitable giving tax rules will soon lower your deduction for donations to charity — here’s what you should do now.
