How Nebraska taxes retirement income
Nebraska does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Social Security benefits are 100% exempt. LB 873 (2022) set a phase-out (40% exempt in 2022, rising to 100% by 2025); LB 754 (2023) accelerated the schedule so the exemption reached 100% starting with tax year 2024. Military retirement pay is separately 100% excludable from Nebraska taxable income (for benefits received on or after Jan 1, 2022), as are CSRS federal civil-service annuities and Railroad Retirement Board benefits. However, Nebraska has no general pension exclusion: private pensions, state/local government pensions (including Nebraska PERS), FERS annuities, and traditional 401(k)/IRA withdrawals are all fully taxed as ordinary income at the regular graduated rates.
Retirement income tax in Nebraska, at a glance
| Income type | Taxed by Nebraska? |
|---|---|
| Social Security | No |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | Inheritance tax |
| Avg. property tax rate | 1.43% of home value |
Does Nebraska tax Social Security benefits?
No. Nebraska does not tax Social Security benefits.
Does Nebraska tax pensions and 401(k) or IRA withdrawals?
Partly. Social Security benefits are 100% exempt. LB 873 (2022) set a phase-out (40% exempt in 2022, rising to 100% by 2025); LB 754 (2023) accelerated the schedule so the exemption reached 100% starting with tax year 2024. Military retirement pay is separately 100% excludable from Nebraska taxable income (for benefits received on or after Jan 1, 2022), as are CSRS federal civil-service annuities and Railroad Retirement Board benefits. However, Nebraska has no general pension exclusion: private pensions, state/local government pensions (including Nebraska PERS), FERS annuities, and traditional 401(k)/IRA withdrawals are all fully taxed as ordinary income at the regular graduated rates.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Nebraska taxation of retirement income (Social Security, pensions, 401(k)/IRA): Nebraska Department of Revenue / Taxation.
- Nebraska estate / inheritance tax: Nebraska tax authority.