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 provides a nonrefundable personal exemption credit for tax year 2025 of $171 per personal exemption, claimed on Form 1040N, line 18 (residents) or Schedule III, line 7 (nonresidents/partial-year residents), multiplied by the number of exemptions. This credit is indexed for inflation per IRC § 151 and subject to phase-out as provided in Regulation Reg-22-019.01A‑B.

Source: Nebraska 2025 Individual Income Tax Booklet (includes Form 1040N instructions); Reg-22-019.01 Personal Exemption Credit (nonrefundable, inflation indexing, AGI phase-out)

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 capped at 60% (2021), 80% (2022–2023), with 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.

Nebraska National Guard income — new subtraction beginning 2025 For taxable years beginning on or after January 1, 2025, Nebraska allows an individual to subtract from federal adjusted gross income any income received for active service as a member of the Nebraska National Guard pursuant to orders issued by the Governor of Nebraska. Any amounts required to be recaptured under Neb. Rev. Stat. § 55-129 (failure to meet service or recapture conditions) must be added back in the year of recapture. This subtraction was enacted by 2024 legislative amendment and is applicable beginning in tax year 2025.

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), 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.

Recent changes: The 2024 legislative session enacted a brand-new subtraction for Nebraska National Guard income (effective for tax years beginning on or after January 1, 2025). This update adds that subtraction, which was not present in the previous version.

For the 2026 tax year, Nebraska continues to allow a nonrefundable personal exemption credit under Neb. Rev. Stat. § 77-2716.01. Each taxpayer may claim one personal exemption credit for every exemption allowed under federal law, with the amount adjusted annually for inflation by the Nebraska Tax Commissioner (see Neb. Rev. Stat. § 77-2716.01(4)). The Tax Commissioner publishes the adjusted amount by December 15 preceding the tax year, with official instructions made available on the Nebraska Department of Revenue's website.

Credit Allocation for Nonresidents and Part-Year Residents

Nebraska statutes require that nonresidents and part-year residents prorate their personal exemption credit based on the portion of Nebraska-source income to total income. The computational steps are:

1. Compute the hypothetical Nebraska income tax as if the individual were a full-year resident (using total federal adjusted gross income as modified by Nebraska law).
2. Subtract the full personal exemption credits that would be allowable to a resident.
3. Multiply the resulting amount by a ratio: Nebraska adjusted gross income (sourced to Nebraska per Neb. Rev. Stat. § 77-2733 or § 77-2733.01) divided by federal adjusted gross income (after Nebraska modifications under Neb. Rev. Stat. § 77-2716 and § 77-2716.01).

This statutory allocation method is set forth at Neb. Rev. Stat. § 77-2715(3) and referenced in Neb. Rev. Stat. § 77-2716.01. The process is implemented annually in the official instructions for Nebraska Form 1040N and its supporting schedules as issued by the Nebraska Department of Revenue.

The exact credit dollar amount for the 2026 tax year has not yet been formally published as of June 2026. Practitioners should consult the Department’s forms and instructions portal for the official notice of the adjusted amount when available.

Source: Neb. Rev. Stat. § 77-2715(3) | Neb. Rev. Stat. § 77-2716.01

In Nebraska, when computing individual income tax, taxpayers must include not only tax on their adjusted gross income but also the Nebraska-tax-equivalent on certain additional federal taxes, including the federal tax on premature or lump-sum distributions from qualified retirement plans.

Per Nebraska Revised Statute § 77‑2715.03(6), for taxable years beginning on or after January 1, 2013, the tax rate applied to these “other federal taxes” is a fixed 29.6 percent. In practical terms, the procedural steps are:

1. Identify the amount of federal tax paid on premature or lump-sum distributions (reported on federal Form 4972).
2. Multiply that federal tax amount by 29.6 percent to determine the Nebraska tax component attributable to that federal tax.

This statutory rate does not vary and is distinct from Nebraska’s marginal tax brackets on income—those brackets are adjusted for inflation under subsections (1)–(5) of the same statute. This 29.6 percent tax applies uniformly to such additional federal tax liabilities included in the base calculation of Nebraska individual income tax, as long as the taxable year begins on or after January 1, 2013.

Source: Neb. Rev. Stat. § 77‑2715.03(6)

Nebraska individual income tax computation starts with federal adjusted gross income (AGI), then requires various state-specific additions to arrive at Nebraska taxable income. These additions, set forth in Neb. Rev. Stat. § 77-2716, are subject to regular legislative amendment. Practitioners are advised to consult the latest text of § 77‑2716 and legislative session laws, as recent bills have materially expanded the required addbacks. Below are the major categories as of June 2026, including key new provisions for the 2025 and 2027 tax years.

Ongoing Additions (as of 2026):

• State and local bond interest (except U.S. and Nebraska): Add interest/dividends from obligations of states or their political subdivisions (other than Nebraska or U.S.), to the extent excluded from federal AGI (77-2716(1)(b)).
• State income tax deduction addback: Add state income taxes deducted on the federal return (77-2716(1)(a)).
• Federal net operating loss (NOL) carryforward: For tax years starting 2024, only NOL allowed under Nebraska law may be deducted; federally allowed excess must be added back (77-2716(4), as amended by LB 754 (2023)).
• Depreciation and expensing: For property placed in service before January 1, 2023, differences between federal and Nebraska depreciation/expensing must be added back. Full conformity for property placed in service on/after 2023 (77-2716(6)-(8)).
• Nonqualified withdrawals from out-of-state 529 plans: Add earnings from certain nonqualified withdrawals if exempted federally (77-2716(1)(h)).
• S corporation and LLC income from outside Nebraska: Add income/loss not derived from Nebraska sources, per apportionment rules.
• Other additions include certain interest/dividends from securities, business interest/limit addbacks, among others (see 77-2716 for exhaustive listing).

Key Legislative Additions:

• Net capital loss on sale/exchange of gold and silver bullion (Addition) — For taxable years beginning on or after January 1, 2025, any net capital loss recognized from the sale or exchange of gold or silver bullion must be added to federal AGI if such losses were deducted at the federal level (77-2716(25), LB 853 (2026)).
• Recapture of incentives (Addition) — For taxable years beginning on or after January 1, 2027, federal AGI is increased by any amount recaptured under section 77–27,232 for the taxable year (77-2716(1)(b), as amended by LB 998 (2026)).

Caution on Frequent Amendments: LB 853 (2026) and LB 998 (2026) both introduced substantive new adjustment categories recently. This section is current as of June 2026 but should be reviewed again prior to each tax year due to Nebraska’s pattern of frequent statutory changes affecting AGI computation.

Source: Neb. Rev. Stat. § 77-2716

(Sources for recent changes: LB 853 and LB 998, 109th Legislature, 2026 Session — but all text now codified in official statute link above.)

Nebraska allows resident individuals a credit against their Nebraska income tax for income taxes paid to another state on income also subject to Nebraska tax. This credit is intended to prevent double taxation of the same income by Nebraska and another state. The statutory authority for the credit is Neb. Rev. Stat. § 77-2730, which specifies eligibility, calculation, and limitations.

Scope and Eligible Taxpayers: The credit applies to residents and part-year residents of Nebraska who are required to pay Nebraska tax on all of their income, including income derived from sources outside Nebraska, and who also pay a net income tax imposed by another state on the same income. The credit does not apply to nonresidents, and it is not allowed for taxes paid to a foreign country or to a local government or city (the credit is for state-level taxes only).

Qualified Taxes and Limitations:

• Only taxes that are "imposed and actually paid" on the taxpayer's income by another U.S. state, the District of Columbia, or a U.S. possession qualify.
• The credit does not apply to taxes paid to cities, counties, or foreign governments.
• The income must be included in Nebraska taxable income and also taxed by the other state. If only a portion of the income is taxed by the other state, the credit is allowed only on that portion.

Method of Calculation: The credit is limited to the lesser of (a) the Nebraska tax attributable to the income taxed by the other state, or (b) the net income tax actually paid to the other state on such income. There is no "carryover" or refund—any credit in excess of the Nebraska tax on the doubly-taxed income is lost. If income is taxed by more than one state, the credit is calculated separately for each and aggregated, but cannot exceed the Nebraska tax on the total doubly-taxed amount.

Procedural Requirements: To claim the credit, taxpayers must complete the Nebraska Schedule I and attach a copy of the other state's income tax return or proof of payment to the Nebraska return. The Nebraska Department of Revenue requires clear documentation, and the credit is not finalized until the other state's tax is actually paid (not merely accrued).

Pass-through Entity and S Corporation Income: For residents who receive pass-through income (such as S corporation or partnership income) subject to tax in another state, the credit may be claimed to the extent Nebraska includes that income and the other state imposes and collects a tax at the entity or individual level. Practitioners must carefully trace eligibility here, as double-taxation must be clearly shown and certain states may only tax nonresidents at the entity level.

Regulatory and Administrative Details: Detailed calculation rules, safe harbors, and examples are set forth in 316 Neb. Admin. Code ch. 22, § 006. The statute and regulation should both be consulted, especially for special cases involving part-year residency, composite returns, or ambiguous sourcing. Nebraska has no reciprocal exemptions with any border states as of June 2026.

Source: Neb. Rev. Stat. § 77-2730 | 316 Neb. Admin. Code ch. 22, § 006

Nebraska requires individual taxpayers to make estimated income tax payments if they expect to owe at least $500 or more in state income tax for the taxable year, after subtracting withholding and credits. This is a higher threshold than was formerly in effect ($300, as still referenced in the old 316 Neb. Admin. Code ch. 20, Reg‑20‑001), and is now clearly stated in the governing statute and latest Department of Revenue guidance. This change to $500 was enacted by legislative amendment to Neb. Rev. Stat. § 77‑2769 and is currently in force for all open tax years as of mid‑2026. Any individual whose Nebraska income tax liability (after credits and withholding) can reasonably be expected to be less than $500 for the tax year is not required to make estimated tax payments.

Who Must Pay and Calculation Method:

Individuals—including sole proprietors, partners, and S corporation shareholders—who anticipate owing at least $500 in Nebraska income tax after credits and withholding are required to make estimated payments. The required annual amount is the lesser of:

• 90% of the current year’s Nebraska tax liability, or
• 100% of the prior year’s Nebraska tax liability (if that year covered all 12 months and a return was filed).

Nebraska does not apply the federal 110% rule for high-income individuals; the prior-year safe harbor remains at 100%, regardless of AGI.

Due Dates for Estimated Payments: Estimated payments are due in four equal installments on:

1. April 15
2. June 15
3. September 15
4. January 15 of the following year

Estimated payments should be submitted using Nebraska Form 1040N-ES. Individuals with all or substantially all income from farming or fishing can avoid penalty if the full amount is paid by March 1 following the tax year or by filing a timely and accurate return and paying the full tax then.

Penalty for Underpayment and Relief: If required estimated payments are not made or are insufficient, Nebraska imposes an underpayment penalty, computed by applying interest to the shortfall calculated from each installment’s due date (in line with the federal method). No penalty applies if (1) the final tax due after credits and withholding is less than $500, (2) the taxpayer paid at least as much as the prior year’s tax, or (3) timely payments plus withholding equal at least 90% of current-year tax due. Special statutory and regulatory waivers are available for casualty, disaster, unusual circumstances, or for first-year Nebraska residents with no prior liability.

Authority Note: As of June 2026, Nebraska statutes and the Nebraska Department of Revenue instructions both use the $500 threshold, while the current Administrative Code section (Reg‑20‑001) still states $300. Statutory authority governs in case of conflict.

Source: Neb. Rev. Stat. § 77‑2769 | Nebraska DOR Estimated Tax Instructions | 316 Neb. Admin. Code ch. 20, Reg‑20‑001