Nebraska retirement taxes at a glance (2026)
| State income tax | Graduated, top rate 4.55%Nebraska has graduated rates with a top rate of 4.55% for 2026, down from 5.2% in 2025. LB 754 (2023) cuts the top rate to 3.99% in 2027. |
|---|---|
| Social Security | Not taxedSocial Security benefits are fully exempt from Nebraska income tax, with no income limit. |
| Pensions | TaxedPrivate pensions are taxed as ordinary income. Nebraska has no general pension exclusion. |
| 401(k) and IRA withdrawals | TaxedTraditional IRA, 401(k), and 403(b) withdrawals are taxed at regular rates. Qualified Roth withdrawals are not taxed. |
| Government pensions | TaxedState and local government pensions get no special exclusion and are taxed like private pensions. Railroad retirement benefits are exempt. |
| Military retirement pay | Not taxedNebraska exempts 100% of military retirement pay since 2022. |
| Estate tax | No |
| Inheritance tax | YesNebraska counties levy an inheritance tax. Close relatives pay 1% on amounts over $100,000, remote relatives 11% over $40,000, and others 15% over $25,000. |
| Property tax help for seniors | The homestead exemption helps homeowners age 65 and older. For 2026, a single person with household income under $37,001 or a married couple under $43,401 can get a 100% reduction, with smaller reductions at higher incomes. |
| Sales tax | State sales tax is 5.5%; the average combined state and local rate is about 6.98%. |
Recent changes and good to know
- Social Security became fully exempt starting with tax year 2024 (AARP describes 2025 as the first full year for filers).
- Top rate schedule under LB 754: 5.84% (2024), 5.2% (2025), 4.55% (2026), 3.99% (2027).
- A weak source says federal CSRS annuities became exempt starting 2024; not verified with a primary source.
How to lower your retirement taxes in Nebraska
- Mix your income sources. Roth IRA withdrawals are tax-free at the federal level and generally in Nebraska too, so a Roth conversion before retirement can cut state tax later. Try the Roth conversion calculator.
- Watch federal Medicare costs. Large IRA withdrawals can raise your Medicare premiums. Check the 2026 IRMAA brackets.
- Think about your heirs. See what your IRA will really cost your family with the Family Tax Rate calculator.
- Comparing states? These have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Frequently asked questions
Does Nebraska tax retirement income?
Partly. Nebraska does not tax Social Security or military retirement, but it taxes pensions and IRA/401(k) withdrawals.
Does Nebraska tax Social Security?
Social Security benefits are fully exempt from Nebraska income tax, with no income limit.
Does Nebraska tax pensions?
Private pensions are taxed as ordinary income. Nebraska has no general pension exclusion.
Does Nebraska tax 401(k) and IRA withdrawals?
Traditional IRA, 401(k), and 403(b) withdrawals are taxed at regular rates. Qualified Roth withdrawals are not taxed.
Does Nebraska tax military retirement pay?
Nebraska exempts 100% of military retirement pay since 2022.
Does Nebraska have an estate or inheritance tax?
Nebraska counties levy an inheritance tax. Close relatives pay 1% on amounts over $100,000, remote relatives 11% over $40,000, and others 15% over $25,000.
Sources (last verified 2026)
- Nebraska Tax Facts for 2026 Tax Season — AARP (2026-05-21)
- State Individual Income Tax Rates and Brackets, 2026 — Tax Foundation (2026-02-17)
- Does Nebraska Tax Pensions and Retirement Income? — LegalClarity (2026-08-13)
Educational content only, not tax, legal or investment advice. Plans and tax laws change; confirm details with your employer's plan documents or your state revenue department. Smart Financial Lifestyle is not affiliated with any employer named on this site.