Living in Nebraska means dealing with a tax system that's about as complex as explaining why Runza is considered fine dining. Whether you're new to the Cornhusker State or a lifelong resident who just realized you've been doing your taxes wrong for years, this guide breaks down everything from income taxes to those sneaky restaurant fees that make your burger cost 9.5% more in Omaha.
Understanding Nebraska's income tax system
Let's start with the tax that hits most of us right in the paycheck. Nebraska uses what tax professionals call a "progressive" system, which basically means the more you make, the higher percentage you pay. Think of it like climbing a ladder where each rung costs a bit more than the last one.
For 2024, Nebraska has four tax brackets that range from 2.46% to 5.84%. If you're single, you'll pay 2.46% on your first $2,999 of taxable income. Then it jumps to 4.84% on income between $3,000 and $17,999, followed by 5.01% on amounts between $18,000 and $28,999. Everything above $29,000 gets hit with the top rate of 5.84%. Married couples filing jointly get to double these brackets, which is one of the few perks of marriage the government actually recognizes.
Here's some genuinely good news though. Nebraska passed major tax reforms in 2023 that will reduce the top rate to 5.20% in 2025 and eventually drop it all the way down to 3.99% by 2027. The state is also condensing from four brackets to three, which won't make your taxes simpler but sounds nice on paper.
How deductions and credits work
Nebraska starts with your federal adjusted gross income and then applies its own deductions. The state follows federal standard deduction amounts, which for 2024 means $14,600 for single filers and $29,200 for married couples filing jointly. After that, you get a personal exemption credit of $157 per person, which is about enough to buy a really nice steak dinner if you ignore the sales tax.
The state offers several credits that can actually make a difference:
- Nebraska Earned Income Credit (10% of federal)
- Child Care Credit (30-100% of federal)
- Property Tax Credit (applied automatically)
- New Family Caregiver Credit (up to $2,000)
That new Family Caregiver Tax Credit starting in 2025 is particularly interesting. You can claim up to $2,000 for eligible caregiving expenses, $3,000 if you're caring for a veteran, or $4,000 if dealing with dementia care. Finally, a tax break that acknowledges how expensive it is to take care of family members.
Special income tax breaks
Starting in 2025, Social Security benefits become 100% exempt from Nebraska income tax. This is huge for retirees who've been getting double-taxed on their benefits. Military retirement income is also fully exempt, which makes Nebraska surprisingly competitive for veterans considering where to spend their golden years.
Your Nebraska income tax return is due April 15, with an automatic extension available until October 15. If you expect to owe more than $400, you'll need to make quarterly estimated payments on April 15, June 15, September 15, and January 15. Miss these dates and the state will charge you interest that would make a credit card company blush.
Navigating sales tax across Nebraska
Here's where things get interesting, and by interesting I mean unnecessarily complicated. Nebraska's state sales tax rate is 5.5%, but cities can tack on up to 2% more. This creates a patchwork of rates that range from 5.5% to 7.5% depending on where you shop.
Currently, 29 cities charge the maximum 7.5% combined rate, including Grand Island and North Platte. Lincoln charges 7.25% total with its 1.75% local tax, while Omaha adds 1.5% for a 7% combined rate. The difference might seem small until you're buying a new TV and realize you could have saved twenty bucks by driving to a different town.
What gets taxed and what doesn't
The good news is that groceries, prescription drugs, and newspapers are exempt from sales tax. The bad news is that Nebraska taxes pretty much everything else, including most services, digital products, and software subscriptions. Yes, your Netflix subscription gets taxed. So does your cloud storage. And your meal at that fancy steakhouse.
Speaking of restaurants, all prepared food is fully taxable, whether you're dining in, taking out, or grabbing a sad sandwich from a vending machine. This applies to everything from five-star restaurants to gas station hot dogs, because Nebraska doesn't discriminate when it comes to taxing your lunch.
The new Good Life Districts
Just when you thought you understood sales tax, Nebraska introduces Good Life Districts. Starting July 1, 2025, the state rate drops to 2.75% in these special zones, but cities can add their own Good Life District taxes. Omaha's Avenue One district and Gretna's Nebraska Crossing Village District will each add 2.75% district taxes, essentially keeping the rate the same but shuffling who gets the money.
If you sell online or run a business, you need to collect Nebraska sales tax if you have $100,000 in sales or 200 transactions annually in the state. And yes, if you buy something online and the seller doesn't charge sales tax, you're technically supposed to pay use tax. I'll wait while you stop laughing.
Property taxes remain Nebraska's biggest burden
Now we come to the elephant in the room. Nebraska's property taxes are the 9th highest in the nation, with an average effective rate of 1.54%. The typical homeowner pays about $3,167 annually, though this varies wildly depending on where you live.
Sarpy County leads the pack with a 2.18% effective rate, followed by Lancaster County at 1.99% and Douglas County at 1.76%. To put this in perspective, if you own a $275,000 home at the state average rate, you're looking at about $4,235 in annual property taxes. That's a really nice vacation you're not taking.
The 2024 special legislative session did provide some relief through LB 34, which created a $750 million School District Property Tax Relief Fund for 2025. This fund will grow to $4.9 billion through 2030, and the credits now apply directly to your property tax statement instead of making you claim them on your income tax return.
Homestead exemptions can help
If you're a senior citizen or disabled, Nebraska offers some meaningful property tax relief. Seniors 65 and older with income under $36,001 (single) or $42,301 (married) receive 100% property tax relief. There's a sliding scale for higher incomes, and qualified disabled veterans face no income limits at all.
Property tax payment deadlines vary by county. Most require payments on May 1 and September 1, while Douglas, Lancaster, and Sarpy counties set their deadlines for March 31 and July 31. Miss these dates and you'll face penalties and interest that accumulate faster than Nebraska humidity in August.
Vehicle taxes add up quickly
Registering your vehicle in Nebraska involves more fees than a budget airline. The base registration fee is just $15, but then come the add-ons:
- Emergency Medical Systems fee ($0.50)
- DMV Cash Fund ($2.00)
- State Recreation Road Fund ($1.50)
- County General Fund ($1.50)
- New plates ($4.10 per plate)
- Alternative fuel vehicle fee ($75 annually)
The motor vehicle tax is separate from registration and is based on your vehicle's original MSRP. This tax decreases as your vehicle ages and disappears entirely once it reaches 14 years old. The revenue gets split with 60% going to schools, 22% to counties, and 18% to cities.
Many cities also impose wheel taxes that can exceed the state registration fees. Omaha and Lincoln are particularly aggressive with these taxes, while Lancaster County only charges wheel taxes to urban residents. Grand Island took a different approach and eliminated its wheel tax in favor of higher sales taxes, proving there's always more than one way to separate you from your money.
Business taxes see major improvements
If you run a business in Nebraska, there's actually some good news. Corporate income tax rates are dropping significantly. For 2024, corporations pay 5.58% on their first $100,000 of taxable income and 5.84% above that. Starting in 2025, this shifts to a flat 5.2% rate, eventually dropping to 3.99% by 2027.
Pass-through entities like S-corporations and LLCs can elect to pay the Pass-Through Entity Tax at the highest individual rate, currently 5.84% in 2024. This election allows the entity to pay state tax while owners receive a federal deduction, which is particularly beneficial given federal tax law changes.
Business personal property tax
Businesses also pay personal property tax on equipment, furniture, and inventory based on fair market value as of January 1. These taxes use the same rates as real property taxes, averaging 1.54% statewide but varying significantly by location. Returns are due May 1 annually, and yes, you have to list every desk, computer, and office chair.
Unemployment insurance taxes for 2025 range from 0% to 5.4% based on your experience rating. New non-construction employers pay 1.25%, while new construction businesses face the full 5.4% rate. Most employers pay tax on the first $9,000 of wages per employee, though negative-rated employers face a $24,000 wage base.
Local taxes target tourists and diners
Cities in Nebraska love occupation taxes, which are basically privilege taxes for specific types of businesses. These get particularly painful at restaurants and hotels.
Omaha imposes the state's highest restaurant tax at 2.5%, bringing your total dining tax to 9.5% when combined with state and local sales taxes. Lincoln charges a 2% restaurant tax for a 9.25% total. These occupation taxes are calculated before sales tax, meaning you pay tax on the tax.
Hotel taxes pile on even more. The state charges a 1% lodging tax for tourism promotion. Omaha adds a 5.5% occupation tax, while Lincoln charges 6%. Counties can impose up to 4% additional lodging taxes, making that budget motel room suddenly not so budget-friendly.
Other common occupation taxes include 6% on telecommunications services in both Omaha and Lincoln, 4% on vehicle rentals, and various rates on tobacco products. Businesses must track these separately and show them on receipts, so at least you know exactly how much extra you're paying.
Inheritance tax affects estate planning
While Nebraska repealed its estate tax in 2007, it remains one of only six states with an inheritance tax. The rate depends on your relationship to the deceased:
- Immediate family members get a $100,000 exemption and pay 1% on amounts above that
- Other relatives receive a $40,000 exemption with an 11% rate
- Non-relatives face only a $25,000 exemption and 15% rate
The good news is that surviving spouses pay no inheritance tax regardless of the amount. Beneficiaries under age 22 and charitable organizations are also completely exempt.
Counties collect these taxes with payment due within 12 months of death. Late payments incur 14% annual interest plus penalties up to 25%. Interestingly, Nebraska dedicates all inheritance tax revenue specifically to permanent improvement of county roads, so at least your loss is fixing potholes.
How Nebraska compares to neighboring states
Nebraska's overall tax burden ranks 38th nationally at 11.5% of income, putting it in the more expensive third of states. Among neighbors, Iowa and Kansas both sit at 11.2%, while Wyoming (7.5%) and South Dakota (8.4%) offer significantly lower burdens thanks to having no income tax.
The ongoing reforms are improving Nebraska's competitive position. The state's Tax Competitiveness Index ranking improved from 28th to 24th place, with more improvements expected as income tax rates continue falling. By 2027, Nebraska's 3.99% top income tax rate will beat Kansas (5.58%), Missouri (4.8%), and Iowa (3.8%).
Recent legislative wins include child care credits up to $2,000 per child and truth-in-taxation requirements limiting property tax growth. While property taxes remain Nebraska's biggest competitive disadvantage, the state is clearly working to become more attractive to both residents and businesses.
Living in Nebraska means navigating a complex tax system, but at least it's getting better. Between dropping income tax rates, new credits for families, and property tax relief efforts, the state is moving in the right direction. Just remember to factor in all those occupation taxes when budgeting for dinner and a hotel stay. And maybe keep a calculator handy.
