Nebraska — Personal Income Tax

Nebraska imposes an individual income tax for each taxable year on the entire income of every resident individual and on the income of every nonresident individual and partial-year resident individual that is derived from sources within the state. The tax is calculated as a percentage of federal adjusted gross income as modified by Nebraska statutes, plus a percentage of the federal tax on premature or lump-sum distributions from qualified retirement plans. For nonresident and partial-year resident individuals, the tax is the portion of the tax imposed on resident individuals that is attributable to income derived from Nebraska sources, determined by a formula that multiplies the tax calculated as if the taxpayer were a resident (minus personal exemption credits) by a fraction—the numerator is the taxpayer's Nebraska adjusted gross income and the denominator is total federal adjusted gross income, with both adjusted by the amounts provided in Neb. Rev. Stat. § 77-2716.

An individual who has additions to adjusted gross income pursuant to Neb. Rev. Stat. § 77-2716 of less than five thousand dollars shall not have an individual income tax liability after nonrefundable credits that exceeds his or her individual income tax liability before credits under the Internal Revenue Code of 1986.

Source: Neb. Rev. Stat. § 77-2715

For taxable years beginning on or after January 1, 2026, Nebraska's personal income tax applies graduated rates with the third-bracket rate at 4.55 percent and the fourth-bracket rate also at 4.55 percent. Both rates are scheduled to decrease to 3.99 percent for taxable years beginning on or after January 1, 2027. The Tax Commissioner adjusts the dollar thresholds of the income brackets annually for inflation; the rates themselves remain fixed.

Source: Neb. Rev. Stat. § 77-2715.03

Nebraska allows resident individuals a nonrefundable personal exemption credit of $171 for each exemption claimed on the federal income tax return for the 2025 tax year. The credit is subtracted directly from the calculated Nebraska income tax liability. For nonresident and part-year resident individuals, the credit is subtracted as specified in Neb. Rev. Stat. § 77-2715(3). The credit amount is adjusted annually for inflation.

Source: Nebraska Form 1040N draft (2025 tax year) and Neb. Rev. Stat. § 77-2716.01

Nebraska individual income tax returns are due on the 15th day of the fourth month following the close of the taxable year — April 15 for calendar-year taxpayers. A federal extension automatically extends the Nebraska filing deadline; taxpayers must attach a copy of the federal extension application to the Nebraska return when filed. Nebraska may also grant a separate state extension of up to seven months even without a federal extension. An extension of time to file also extends the time for payment of the tax, though interest accrues from the original due date.

Source: 316 Neb. Admin. Code ch. 22, § 012 and Neb. Rev. Stat. § 77-2770

Nebraska classifies individuals into three categories for income tax purposes: resident, nonresident, and partial-year resident. The classification drives what income is subject to Nebraska tax and how the tax is calculated.

Resident individual

An individual qualifies as a Nebraska resident under either of two independent tests set forth in Neb. Rev. Stat. § 77-2714.01(7):

1. Domicile test: The individual is domiciled in Nebraska, or
2. Permanent-place-of-abode-plus-presence test: The individual maintains a permanent place of abode in Nebraska and spends in the aggregate more than six months of the taxable year in the state.

Under the domicile test, domicile means the place where an individual has his or her true, fixed, and permanent home and principal establishment, and to which whenever absent the individual has the intention of returning. Actual residence is not necessarily domicile; a person may be temporarily residing elsewhere but still domiciled in Nebraska. To acquire a domicile by choice, there must be both (1) bodily presence in the new locality and (2) an intention to remain there; to change domicile, there must be an intention to abandon the old domicile. The Nebraska Supreme Court has held that where facts are conflicting or there is reasonable doubt, the presumption favors the original or former domicile over an acquired one.

Under the permanent-place-of-abode test, a permanent place of abode means a dwelling place permanently maintained by the taxpayer—whether or not owned—and includes a house, apartment, room, or other accommodation suitable for human occupation. An individual who maintains such a place in Nebraska and is present in the state for an aggregate of more than six months (183 days) in the taxable year is considered a resident, even if the place of abode is not actually used during that period. The six-month threshold counts presence anywhere in Nebraska; the individual need not spend the time at the permanent place of abode itself.

Nonresident individual

A nonresident individual is defined negatively in Neb. Rev. Stat. § 77-2714.01(4): any individual who is not a resident as defined above. Nonresidents are taxed only on income derived from or connected with Nebraska sources.

Partial-year resident

A partial-year resident, defined in 316 Neb. Admin. Code ch. 22, § 001.02, is any person who is not a resident or nonresident for the entire taxable year. To qualify as a partial-year resident, the taxpayer must change domicile during the year—either establishing or abandoning Nebraska domicile. An individual establishes Nebraska residence on the date he or she arrives in the state for other than temporary or transitory purposes. Nebraska residence is terminated on the date an individual leaves the state, abandons any intention of returning, and establishes a residence in another state while present in that other state for other than temporary or transitory purposes.

Military servicemembers

Nebraska regulations provide that an individual who is a Nebraska resident does not terminate residency upon entering the armed services of the United States. A member domiciled in Nebraska at the time of entry generally retains Nebraska residency throughout military service, regardless of duty station or duration.

Source: Neb. Rev. Stat. § 77-2714.01 | 316 Neb. Admin. Code ch. 22, § 001 | Acklie v. Nebraska Dept. of Rev., 313 Neb. 28, 982 N.W.2d 228 (2022)

Nebraska individual income tax begins with federal adjusted gross income and applies state-specific modifications under Neb. Rev. Stat. § 77-2716 and § 77-2716.01. The statute authorizes more than two dozen subtractions; practitioners most commonly encounter the following categories.

Social Security benefits — 100% subtraction beginning 2024

For taxable years beginning on or after January 1, 2024, individuals may subtract 100% of Social Security benefits received under the federal Social Security Act to the extent included in federal adjusted gross income. This full exemption replaced a prior phase-in regime that capped the subtraction at 60% (2021), 80% (2022–2023), and applied income limits. The 2024 and later exemption has no income cap; all taxpayers subtract the full amount of federally taxable Social Security benefits regardless of AGI. The subtraction applies to individuals, estates, and trusts. The change was enacted by LB 754 (2023).

Military retirement benefits — 100% subtraction beginning 2022

For taxable years beginning on or after January 1, 2022, individuals may exclude 100% of military retirement benefit income to the extent included in federal adjusted gross income. Military retirement benefit means periodic payments attributable to service in the uniformed services of the United States, reported on IRS Form 1099-R from either the U.S. Department of Defense or the U.S. Office of Personnel Management. The subtraction includes survivor benefit plan (SBP) payments and annuity payments to a spouse or former spouse based on another individual's military service, provided the benefit is reported on the taxpayer's 1099-R. No application or election is required. Before 2022, a limited election-based subtraction applied; the full 100% exemption was enacted by LB 387 (2021).

Federal civil service retirement — CSRS and FERS annuities beginning 2024

For taxable years beginning on or after January 1, 2024, an individual may reduce federal adjusted gross income by amounts received as annuities under the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS) that were earned for employment with the federal government, to the extent such amounts are included in federal AGI. This subtraction was added by LB 754 (2023) and codified in Neb. Rev. Stat. § 77-2716(20). The statute does not expressly address other federal retirement systems (e.g., Foreign Service Retirement); the subtraction is limited to CSRS and FERS by its terms.

State income tax refunds

Nebraska allows a subtraction for any state income tax refund to the extent the refund (1) was deducted on the federal return under the Internal Revenue Code, (2) was not allowed in the computation of Nebraska tax, and (3) is included in federal adjusted gross income. This prevents double taxation of the same state tax benefit and has applied for all taxable years beginning on or after January 1, 1987.

U.S. government obligations interest

Interest or dividends on obligations of the United States and its territories, possessions, authorities, commissions, or instrumentalities are subtracted to the extent includable in federal gross income but exempt from state tax under federal law. This subtraction implements the intergovernmental tax immunity doctrine.

Nebraska educational savings plan contributions and earnings

Federal adjusted gross income is reduced by (1) contributions to the Nebraska educational savings plan trust (Nebraska's 529 plan), to the extent not deducted federally, up to $10,000 per return (or $5,000 for married filing separately); (2) interest, earnings, and state contributions received from the plan; and (3) contributions to an ABLE (achieving a better life experience) account, subject to the same dollar limits. With respect to qualified rollovers under IRC § 529 from another state's plan, any interest, earnings, and state contributions received from the other state's 529 plan also qualify for the reduction. A parallel subtraction applies to contributions to the Give to Enable Support Cash Fund.

S corporation and LLC income from non-Nebraska sources

Federal adjusted gross income is modified to exclude the portion of income or loss from an S corporation or a Nebraska LLC that is not derived from or connected with Nebraska sources, as determined in Neb. Rev. Stat. § 77-2734.01. This prevents Nebraska from taxing a resident's share of out-of-state business income that has no Nebraska nexus.

Standard deduction

Nebraska residents who do not itemize on their federal return subtract a Nebraska standard deduction under Neb. Rev. Stat. § 77-2716.01. For taxable years beginning on or after January 1, 2018, the Nebraska standard deduction is indexed annually for inflation. Residents who itemize federally may subtract the greater of their federal itemized deductions (subject to adjustments for the $10,000 state and local tax cap) or the Nebraska standard deduction. The standard deduction is technically a separate subtraction statute (§ 77-2716.01) rather than a subsection of § 77-2716, but it is part of the same computational framework.

Other subtractions

Section 77-2716 authorizes additional subtractions for long-term care savings plan contributions (for years before 2018), net operating loss carryovers, certain recaptured federal bonus depreciation and IRC § 179 expensing, firefighter cancer benefits (beginning 2022), Nebraska National Guard income (beginning 2025), gold and silver bullion capital gains (beginning 2025), and medical debt relief fund contributions (beginning 2024). Practitioners should consult the full text of § 77-2716 for the complete list and effective-date schedule.

Source: Neb. Rev. Stat. § 77-2716 | Neb. Rev. Stat. § 77-2716.01 | 2021 Nebraska Legislative Changes (LB 387, military retirement)