Nebraska Has Both State Income Tax and Sales Tax

Yes, Nebraska has a state income tax. The state taxes wages, salaries, business income, and investment earnings. Nebraska also has a state sales tax of 5.5 percent, plus local sales taxes that vary by county and city—so your total sales tax rate depends on where you shop.

If you work in Nebraska or live there, you will owe state income tax on your earnings. The tax brackets and rates change slightly each year, but Nebraska uses a progressive system where higher earners pay a higher percentage. Self-employed people, retirees with investment income, and people who receive business distributions all have state tax obligations in Nebraska.

Key Takeaways

  • Nebraska taxes income at rates ranging from 2.84 percent to 6.84 percent depending on your income level, with the exact brackets adjusted annually.
  • The state sales tax is 5.5 percent, but your actual sales tax rate is higher because counties and cities add their own local sales taxes on top.
  • You must file a Nebraska state income tax return if you earned income in the state, even if you do not owe tax after deductions and credits.
  • Nebraska offers property tax credits and other deductions that can lower your state income tax bill if you meet the income and residency requirements.

Nebraska Income Tax Brackets and Rates

Nebraska uses four tax brackets for single filers and four for married filers filing jointly. The lowest bracket starts at 2.84 percent on the first portion of your income, and the highest bracket reaches 6.84 percent on income above a certain threshold. These thresholds shift each year because Nebraska adjusts them for inflation.

For the 2024 tax year, a single filer with income between roughly $3,340 and $8,510 falls into the second bracket at 3.57 percent. The exact dollar amounts change annually, so you will need to check the Nebraska Department of Revenue website or your tax forms to find the current year's brackets. Married couples filing jointly have higher income thresholds before moving into each bracket, which means they pay the lower rates on more income than single filers do.

You can reduce your taxable income through the standard deduction or by itemizing deductions. Nebraska allows you to claim either the federal standard deduction or Nebraska-specific deductions, whichever is larger. Many people also claim credits—such as the property tax credit or dependent credits—which directly reduce the tax you owe rather than reducing your income.

Who Must File a Nebraska State Tax Return

You must file a Nebraska state income tax return if your income exceeds the filing threshold for your filing status. The threshold depends on your age and whether you are claimed as a dependent on someone else's return. Generally, if you earned more than the standard deduction amount, you should file.

Even if you do not owe tax, filing can be worthwhile. Nebraska offers refundable credits—meaning you can receive money back even if you owe zero tax—so filing may result in a refund. Self-employed people must file if their net earnings from self-employment are $400 or more, regardless of total income.

Sales Tax and Local Tax Rates

Nebraska's state sales tax of 5.5 percent applies to most goods and some services. However, groceries, prescription medications, and certain medical devices are exempt from sales tax. When you buy something in Nebraska, you pay the 5.5 percent state rate plus whatever local sales tax your county or city has added.

Local sales tax rates range from 0.5 percent to 1.5 percent depending on the county and city. For example, if you shop in Omaha (Douglas County), you pay 5.5 percent state tax plus 1.5 percent local tax, for a total of 7 percent. In Lincoln (Lancaster County), the local rate is 1 percent, bringing the total to 6.5 percent. Check the Nebraska Department of Revenue website or ask a local retailer if you need to know the exact rate for your area.

Property Tax Credits and Deductions

Nebraska offers a property tax credit that can reduce your state income tax if you own or rent a home and meet income limits. The credit is based on your property taxes or rent paid during the year and your household income. Lower-income households receive larger credits, and the credit phases out as income rises.

To claim the property tax credit, you file a separate form (Form 6) along with your state income tax return. You will need to provide proof of property taxes paid or rent paid, so keep receipts and lease agreements. The credit can be substantial—some households receive hundreds of dollars back—so it is worth checking whether you may have access to.

Filing Your Nebraska State Tax Return

You can file your Nebraska state return on paper or electronically. The state accepts federal tax forms and state-specific forms through the mail, or you can file electronically through the Nebraska Department of Revenue's website or through tax software that supports Nebraska returns.

Your Nebraska return is due on the same date as your federal return—typically April 15 unless that date falls on a weekend or holiday. If you file your federal return late or request an extension, your Nebraska return follows the same important date. File as early as possible if you expect a refund, since the state processes returns in the order they arrive.

Frequently Asked Questions

Does Nebraska tax retirement income and Social Security?

Nebraska does not tax Social Security benefits. However, retirement income from pensions, 401(k) withdrawals, and IRA distributions is taxable as regular income. Some retirees may may have access to for a pension or retirement income exclusion if they meet age and income requirements—check the Nebraska Department of Revenue for current rules.

What if I work in Nebraska but live in another state?

You owe Nebraska state income tax on wages earned in Nebraska, even if you live elsewhere. You may also owe tax to your home state. Some states have reciprocal agreements that prevent you from being taxed twice, but you will need to file returns in both states and claim credits to avoid double taxation.

Can I deduct federal taxes paid from my Nebraska state return?

No, Nebraska does not allow you to deduct federal income taxes paid. You can deduct state and local taxes paid, but only up to $10,000 total per year (this is a federal limit that affects your federal return, not your Nebraska return).

Is there a penalty if I file my Nebraska return late?

Yes. If you owe tax and file late, Nebraska charges a penalty of 5 percent of the unpaid tax per month, up to 25 percent total. Interest also accrues on unpaid tax. If you expect to owe, file on time or request an extension before the important date to avoid penalties.

Where do I send my paper Nebraska tax return?

Mail your completed return to the Nebraska Department of Revenue at the address listed on the tax form instructions. Keep a copy for your records and consider sending it certified mail if you want proof of delivery. Electronic filing is faster and reduces the chance of errors.