State-by-State Guide to Taxes on Retirees - Nebraska
Tool | November 2019

State-by-State Guide to Taxes on Retirees

Nebraska

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The Bottom Line
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Least Tax-Friendly

Nebraska is the least tax-friendly state in the nation for retirees, primarily because of steep income and property taxes. The Cornhusker State taxes some Social Security benefits and most other retirement income, including IRA withdrawals, 401(k) funds, and public and private pensions. Residents can subtract Social Security income included in federal adjusted gross income if their AGI is $58,000 or less for married couples filing jointly or $43,000 for single residents. However, if their income exceeds the applicable threshold, their Social Security benefits are tax by Nebraska to the same extent that they’re taxed on the federal level. Plus, the top income tax rate kicks in pretty quickly: It applies to taxable income above $31,160 for single filers and $62,320 for married couples filing jointly.

The average property tax rate in Nebraska is pretty high. For a $400,000 home, the state-wide average tax in the state is $7,421 per year. That’s the eighth-highest property tax amount in country.

State Sales Tax

5.5% state levy. Localities can add as much as 2.0%, and the average combined rate is 6.88%, according to the Tax Foundation.

Income Tax Range

Low: 2.46% (on up to $3,150 of taxable income for single filers and $6,290 for married couples filing jointly)

High: 6.84% (on taxable income over $30,420 for single filers and $60,480 for married couples filing jointly)

Effective tax rate: 3.23% for single filers, 5.22% for joint filers

Social Security

Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $58,000 or less and other taxpayers with a federal AGI of $43,000 or less. For taxpayers exceeding these thresholds, Social Security benefits are taxed by Nebraska to the same extent they are taxed at the federal level.

Exemptions for Other Retirement Income

Military retirees can choose to exclude either (1) 40% of military retirement income for seven years, or (2) 15% of military retirement income for all years beginning at age 67.

Railroad Retirement benefits are fully exempt.

Property Taxes

In Nebraska, residents pay an average of $1,855 in taxes per $100,000 of assessed home value.

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 $28,201 and married filers earning less than $33,901 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.

Vehicle Taxes

Sales tax is due. Additionally, the state charges an annual tax based on value. For a 3-year-old car that was $20,000 when new, the tax would be $240.

Inheritance and Estate Taxes

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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