What Is the Nebraska Income Tax Rate?
Understand Nebraska's evolving income tax system. Learn how state-specific adjustments and credits affect your final tax liability calculation.
Nebraska’s individual income tax is a source of state revenue. The state employs a progressive tax system where the tax rate increases with income, but this structure is in a transitional phase. Recent legislation initiated a gradual shift toward a flat tax rate, changing how income is taxed in the coming years.
Nebraska Individual Income Tax Rates and Brackets
Nebraska’s income tax structure uses income brackets that determine the tax rate applied to a resident’s earnings. The rates are applied based on the taxpayer’s filing status: Single, Married Filing Jointly, Married Filing Separately, and Head of Household. Each status has its own income thresholds.
A 2023 law, LB 754, mandates a gradual reduction in individual income tax rates and the number of brackets. This law began a multi-year transition toward a single flat tax rate.
For the 2025 tax year, the top rate will decrease to 5.20%. By 2026, the rate is set to fall to 4.55%. The process will culminate in 2027, when the rate will be a flat 3.99%.
Calculating Nebraska Adjusted Gross Income
The starting point for calculating your Nebraska income tax is your federal Adjusted Gross Income (AGI). Nebraska requires taxpayers to modify their federal AGI by adding certain income not taxed federally but taxable by the state, and subtracting other income the state exempts.
An example of an addition is interest earned from municipal bonds issued by states other than Nebraska. Nebraska requires this interest to be included in the state’s taxable income calculation.
Nebraska also allows for several subtractions from federal AGI. A subtraction is for Social Security benefits, as this income is fully exempt from state income taxes. Another subtraction is interest income from U.S. government obligations, such as Treasury bonds.
Nebraska Tax Deductions and Credits
After determining Nebraska AGI, taxpayers can reduce their taxable income through deductions. Nebraska offers a standard deduction that varies by filing status. Taxpayers have the option to take the standard deduction or to itemize their deductions.
Nebraska also provides several tax credits that directly reduce the amount of tax owed. A credit is available for taxes paid to another state, which prevents double taxation for residents who may have earned income in another state.
Other credits support families and specific economic activities. The School Readiness Tax Credit offers both nonrefundable and refundable credits to eligible childcare providers and staff, with a total program cap of $7.5 million annually.
Beginning in 2025, the Family Caregiver Tax Credit will offer a nonrefundable credit for eligible expenses for those caring for a family member. The credit is for up to $2,000, or $3,000 if the family member is a veteran or has dementia. Eligibility requires a federal adjusted gross income below $100,000 for married filing jointly, or $50,000 for all other filers. The state caps the total credits at $1.5 million annually and approves applications on a first-come, first-served basis.
How to File and Pay Your State Taxes
The Nebraska Department of Revenue offers multiple methods for filing. The most common method is electronic filing, or e-filing, which can be done through approved software vendors or the department’s website. E-filing results in faster processing and quicker receipt of any refund.
Paper forms can also be downloaded from the Department of Revenue’s website and mailed. If a payment is owed, it can be made electronically through the state’s online payment portal or by mailing a check or money order with a payment voucher. After filing, you can track the status of your refund on the department’s website.