How Much Does Nebraska Take Out for Taxes?

Nebraska relies on taxes from residents and businesses to finance public services like education, infrastructure, and public safety. This article outlines the primary types of taxes individuals encounter in Nebraska and their general financial impact.

Understanding Nebraska Individual Income Tax

Nebraska operates a progressive individual income tax system, where higher income levels are subject to higher marginal tax rates. For the 2024 tax year, the state employs four tax brackets, with rates ranging from 2.46% to 5.84%. The specific rate applied depends on an individual’s taxable income and filing status, such as single, married filing jointly, or head of household. For instance, the highest rate of 5.84% applies to single filers with income over $29,000.

Taxable income generally begins with federal adjusted gross income (AGI), with state-specific adjustments. Taxpayers can reduce their taxable income through either a standard deduction or by itemizing deductions. For 2024, standard deduction amounts are $8,350 for single filers, $12,250 for head of household, and $16,700 for married filing jointly. If federal itemized deductions exceed the Nebraska standard deduction, taxpayers may use their federal itemized deductions, minus state and local income taxes.

Nebraska also allows for a personal exemption, which functions as a credit against tax liability. Common forms of income, such as wages, salaries, interest, and dividends, are included in taxable income. Certain types of income, like a portion of Social Security benefits, are exempt from state income tax, with a full exemption anticipated by the 2025 tax year.

Understanding Nebraska Sales and Use Tax

Nebraska imposes a state sales and use tax on the retail sale of goods and certain services. The statewide sales tax rate is 5.5%, applying to most tangible personal property purchased within the state.

Local sales taxes can be levied by municipalities and counties, added to the state rate. These local rates vary, ranging from 0% to 2%, resulting in combined sales tax rates up to 7.5%. For example, Omaha has a local sales tax rate of 1.5%, bringing its combined rate to 7.0%.

Many everyday items are subject to sales tax, including clothing, electronics, and restaurant meals. However, common exemptions exist for necessities like most groceries and prescription medications.

The state also enforces a “use tax,” which complements the sales tax. Use tax applies to purchases made outside Nebraska but consumed or stored within the state, where Nebraska sales tax was not collected. This commonly occurs with online purchases from out-of-state retailers. The use tax rate is identical to the combined state and local sales tax rate that would have applied had the purchase occurred in Nebraska.

Understanding Nebraska Property Tax

Property taxes in Nebraska are a local levy, funding services at the county, city, and school district levels, including schools, law enforcement, and fire departments. The amount of property tax owed depends on the property’s assessed value and local tax rates.

Property assessments determine a property’s fair market value, which becomes its assessed value for tax purposes. This valuation considers factors like location, size, condition, and recent sales of comparable properties.

Local tax rates, often expressed as mill levies, are applied to the assessed value to calculate the annual property tax bill. A mill levy represents the amount of tax per $1,000 of assessed value. For example, a mill levy of 10 mills means $10 of tax for every $1,000 of assessed value. These rates vary depending on the specific taxing authorities where the property is located.

Nebraska offers a Homestead Exemption program, providing property tax relief to qualifying homeowners. This program is available to specific groups, including individuals aged 65 or older, qualified disabled individuals, and qualified totally disabled veterans and their surviving spouses. The exemption reduces the property’s taxable value. Eligibility is subject to income limitations and property valuation requirements, and an annual application is required.

Other Key Nebraska Taxes

Beyond income, sales, and property taxes, Nebraska residents encounter several other taxes. Motor vehicle taxes are collected annually, based on the vehicle’s manufacturer’s suggested retail price (MSRP) and its age. The tax amount decreases as the vehicle ages, with rates varying based on the vehicle’s value when new.

Excise taxes are also imposed on specific goods and services. The state’s motor fuel tax is levied on gasoline, gasohol, diesel, and other fuels. As of January 1, 2025, the rate is 30.4 cents per gallon, increasing to 31.8 cents per gallon from July 1, 2025, through December 31, 2025. Tobacco products are also subject to excise taxes; cigarettes are taxed at 64 cents per pack for 20-stick packs, while snuff is taxed at 44 cents per ounce, and other tobacco products at 20% of their wholesale purchase price.

Nebraska imposes an inheritance tax, which applies to property transferred from a deceased individual to their beneficiaries. The tax rate and exemption amount depend on the beneficiary’s relationship to the deceased. For example, immediate relatives like parents, children, and siblings receive a $100,000 exemption and are taxed at 1% on amounts exceeding this threshold. More distant relatives face higher rates and lower exemption thresholds, while transfers to spouses are exempt. This tax is administered at the county level and becomes due within 12 months of the decedent’s death.