Nebraska does have state income tax

Nebraska taxes your income at the state level. Unlike seven states that have no income tax at all, Nebraska requires residents and nonresidents earning money in the state to file a state return and pay tax on most types of income.

The tax applies to wages, self-employment income, interest, dividends, and capital gains. The rates vary depending on how much you earn — Nebraska uses a progressive system with multiple tax brackets that change each year. Your filing status (single, married filing jointly, head of household) also affects your rate.

If you work in Nebraska but live in another state, you may owe Nebraska tax on that income. If you live in Nebraska but work in another state, you typically owe Nebraska tax on all your income, though you can claim a credit for taxes paid to the other state to avoid double taxation.

Key Takeaways

  • Nebraska has a progressive income tax system with rates that increase as your income increases, ranging across multiple brackets.
  • You must file a Nebraska state return if you earned income in the state during the tax year, regardless of whether you live there.
  • Nebraska allows a credit for income taxes paid to other states, so you do not pay tax twice on the same income.
  • The tax year important date for Nebraska returns is the same as the federal important date, typically April 15, though extensions are available.

Nebraska tax brackets and rates for 2024

Nebraska's income tax brackets depend on your filing status. The state uses four brackets: the lowest rate applies to the first portion of your income, and the rate increases as you move into higher brackets. The exact dollar amounts for each bracket change annually based on inflation adjustments.

For the 2024 tax year, single filers face rates starting at 2.84% on the lowest bracket and reaching 6.84% on the highest. Married couples filing jointly have higher income thresholds before moving into each bracket, which means you pay the same rate on more income. Head of household filers fall between single and married rates.

The Nebraska Department of Revenue publishes updated bracket amounts each year on their website. You will need the correct brackets for the year you are filing — using last year's brackets on this year's return creates errors that delay your refund or trigger an audit notice.

What income counts and what does not

Nebraska taxes wages, salaries, tips, and self-employment income. If you received a W-2 from an employer or reported self-employment income on Schedule C, that income is taxable in Nebraska.

Interest from savings accounts and certificates of deposit counts as taxable income. Dividends from stocks and mutual funds are taxable. Capital gains — the profit when you sell an investment at a higher price than you paid — are taxable. Retirement distributions from IRAs and 401(k)s are taxable unless they fall into a specific exemption.

Some income is exempt. Social Security benefits are not taxed by Nebraska. Military retirement pay is exempt for active-duty service members and some veterans. Certain pension income may be exempt if you meet age and income requirements — this exemption phases out as your income rises. Disability benefits from Social Security (SSDI) are not taxed.

Income from municipal bonds issued by Nebraska municipalities is exempt. Income from U.S. Treasury securities is exempt from state tax (though still subject to federal tax).

Filing requirements and important date

You must file a Nebraska return if your income exceeds the threshold for your filing status. The threshold changes each year. For 2024, a single person with more than $5,100 in income must file; a married couple filing jointly with more than $10,200 must file. These amounts increase slightly each year.

The important date to file is April 15 of the year following the tax year, the same as the federal important date. If you file a federal extension, you automatically receive an extension for your Nebraska return — you have until October 15 to file. However, any taxes owed are still due by April 15; an extension only extends the filing important date, not the payment important date.

You can file your Nebraska return on paper using Form 1040N, or you can file electronically. The Nebraska Department of Revenue accepts e-file through tax software and through authorized e-file providers. Electronic filing is faster and produces fewer errors than paper filing.

Credits and deductions that lower your Nebraska tax

Nebraska allows a standard deduction, which reduces the amount of income you actually pay tax on. The standard deduction amount depends on your filing status and age. If you are 65 or older, you receive a higher standard deduction. You can also itemize deductions if your itemized total exceeds the standard deduction, though most filers use the standard deduction.

Nebraska offers a child and dependent care credit if you paid for childcare to allow you to work. The credit is a percentage of what you paid, up to a limit. You must have earned income and a may have access to dependent.

A property tax credit is available if you own your home and your property taxes are high relative to your income. The credit phases out as income rises. Renters do not receive this credit.

If you paid income tax to another state on income you also owe Nebraska tax on, you can claim a credit for the tax paid to that state. This prevents you from paying tax twice on the same income. The credit is limited to the lesser of what you paid to the other state or what you owe to Nebraska.

How to file your Nebraska return

Gather your federal tax documents first: your W-2s from employers, 1099 forms for interest and dividends, and any other income statements. You will use the same income figures on your Nebraska return that you reported to the IRS.

If you are filing on paper, read Form 1040N from the Nebraska Department of Revenue website. Complete the form using your federal return as a reference — most lines correspond to federal lines. Attach any required schedules (such as Schedule C if you are self-employed) and mail the return to the address shown on the form.

If you are filing electronically, use tax software that supports Nebraska returns. Most major tax software platforms include Nebraska. You will enter your income and deductions the same way you do for your federal return, and the software calculates your Nebraska tax automatically. After you file your federal return, you can file your Nebraska return through the same software.

Keep copies of your return and all supporting documents for at least three years. The Nebraska Department of Revenue can audit returns up to three years back in most cases, and you will need documentation to support the numbers you reported.

Nonresident and part-year resident rules

If you moved to Nebraska during the year, you are a part-year resident. You owe Nebraska tax only on income earned while you were a resident. You must report your move date and calculate which portion of your annual income was earned in Nebraska versus outside the state.

If you worked in Nebraska but lived in another state for the entire year, you are a nonresident. You owe Nebraska tax on income earned in Nebraska. You do not owe tax on income earned outside Nebraska, even if you are a Nebraska resident. Some states have reciprocal agreements with Nebraska, meaning residents of those states who work in Nebraska do not owe Nebraska tax — check with your home state's tax authority.

Nonresidents and part-year residents file Form 1040N-NR (Nonresident Return) instead of the standard return. The form requires you to identify which income is Nebraska-source and which is not.

Frequently Asked Questions

Do I have to file a Nebraska return if I already filed a federal return?

Only if your income exceeds Nebraska's filing threshold for your status. The threshold is lower than the federal threshold, so some people who file federal returns do not have to file Nebraska returns. Check the current year's threshold on the Nebraska Department of Revenue website.

What happens if I file late or do not file at all?

The Nebraska Department of Revenue can assess penalties and interest on unpaid taxes. If you owe tax and do not file, penalties increase the longer you wait. If you are owed a refund, you have three years to file and claim it; after three years, the refund is forfeited to the state.

Can I deduct federal income tax paid on my Nebraska return?

No. Nebraska does not allow a deduction for federal income tax paid. You can deduct state and local property taxes and sales taxes (you choose one), but not federal income tax.

Do I owe Nebraska tax on income from a 401(k) withdrawal?

Yes, unless you may have access to for a pension exemption. Distributions from 401(k)s and traditional IRAs are taxable income in Nebraska. Roth IRA withdrawals of contributions (not earnings) are not taxable. Military retirement pay may be exempt depending on your service and income level.

What if my employer withheld too much Nebraska tax?

You will receive a refund when you file your return. The refund is calculated by comparing what you owed for the year to what was withheld. File your return to claim the refund; do not contact your employer to adjust withholding mid-year unless you expect the overage to continue into the next year.