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.
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.
So, 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: Nebraska 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?
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 may 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 to see if they qualify.
Nebraska gas taxes
Gasoline |
$0.27 per gallon |
Gasoline |
$0.27 per gallon |
Source: Sales Tax Handbook
Nebraska taxes on alcohol and tobacco
Product |
Tax Amount |
|---|---|
Cigarettes |
$0.64 per pack |
Other tobacco products |
20% of wholesale price |
Source: Sales Tax Handbook
Product |
Tax Amount |
|---|---|
Wine |
$0.95 per gallon |
Beer |
$0.31 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 the tax, but other heirs could get a hefty tax bill.
- Children, parents, grandchildren, siblings, and grandparents are subject to a 1% tax on inheritances over $100,000.
- Aunts, uncles, nieces, and nephews pay an 11% tax on inheritances over $40,000.
- Other heirs are responsible for a 15% inheritance tax on amounts over $25,000.
