Nebraska Tax Guide 2026

Personal income tax — phase-down to 3.99%

LB 873 of 2022 and LB 754 of 2023 (signed by Gov. Pillen) set a multi-year phase-down: • 2023: 6.64% top rate (was 6.84% pre-reform) • 2024: 5.84% top • 2025: 5.20% top • 2026: 5.20% top (delayed reduction; legislature paused 2026 cut) • 2027: 3.99% FLAT (final scheduled rate) 2026 brackets (single, indexed): • 2.46% on first $3,700 • 3.51% from $3,700 to $22,170 • 5.01% from $22,170 to $36,870 • 5.20% above $36,870 Standard deduction: $7,900 single / $15,800 MFJ (indexed). Personal exemption credit $157/person. Social Security: 100% EXEMPT from Nebraska income tax effective 2024 (LB 873 of 2022 accelerated full exemption; previously partial). Military retirement: 100% EXEMPT (Neb. Rev. Stat. §77-2716(15)).

Convenience-of-employer rule — the remote-worker trap

Nebraska Regulation 22-003.01C applies a CONVENIENCE-OF-EMPLOYER doctrine similar to New York's. A non-resident performing services for a Nebraska employer is treated as performing those services IN NEBRASKA — and is taxable in Nebraska — unless the work outside Nebraska is performed for the employer's CONVENIENCE (i.e., the employer's bona fide business need to have the employee work from outside Nebraska). If the employee works remotely from outside Nebraska for the EMPLOYEE'S personal convenience (preference, lifestyle, etc.), Nebraska treats those wages as Nebraska-source and taxes them. Practical effect: • A South Dakota resident working remotely from Sioux Falls for an Omaha-based employer: typically OWES Nebraska income tax on all wages (employer convenience standard not met) • Same person physically commuting some days: only owes for in-NE days • Same person whose role REQUIRES out-of-state presence (e.g., field sales territory outside NE): doesn't owe Nebraska tax on those out-of-state days This catches surprised remote workers — particularly those who moved out of Nebraska post-COVID but kept their Nebraska employer. The other 4 convenience-of-employer states are NY, CT, PA, and DE.

Sales tax

State rate 5.5% (Neb. Rev. Stat. §77-2701). Cities can add up to 2% local-option (and certain counties an additional 0.5%) — combined averages 6.97% statewide. Notable cities: • Omaha: 7.0% combined • Lincoln: 7.25% • Bellevue: 7.0% • Grand Island: 7.5% • Kearney: 7.0% Groceries: EXEMPT. Prescription drugs: exempt. Clothing: taxable. Most services: exempt (manufacturing machinery exempt for production use). Economic nexus (Neb. Rev. Stat. §77-2701.13(8)): $100,000 in cumulative sales OR 200 transactions.

Property tax — high burden

Statewide average effective ~1.63% — among the higher rates in the US. Heavy reliance on property tax for K-12 funding (Nebraska school finance formula concentrates burden locally). Douglas County (Omaha): ~2.16%, Lancaster (Lincoln): ~2.11%, Sarpy: ~2.30%, Hall (Grand Island): ~1.93%. Homestead exemption (Neb. Rev. Stat. §77-3502): up to $100,000 reduction in assessed value (income-tested) for elderly/disabled homeowners. LB 1107 of 2020 created the Property Tax Incentive Act: REFUNDABLE income tax credit equal to a designated percentage of school district property taxes paid (~30%+ for 2024–25; varies annually). LB 754 of 2023 also added a 30% community college property tax credit. Net result: HEADLINE property tax is high (~1.63%) but the state income tax refunds a meaningful portion back to homeowners — effective burden after the credit is closer to ~1.1%.

Inheritance tax — a unique county-level levy

Nebraska is one of only 6 states with an INHERITANCE TAX (Neb. Rev. Stat. §77-2004). Distinguished from federal/state estate tax — taxes the recipient based on relationship to decedent. Uniquely, the inheritance tax is COLLECTED BY COUNTIES (not the state) and revenues fund county budgets. LB 310 of 2022 (effective Jan 1, 2023) significantly RAISED exemptions: • Class 1 (immediate family: spouse fully exempt; lineal descendants/ascendants $100,000 exemption + 1% rate): preferential rate • Class 2 (siblings, nieces, nephews): $40,000 exemption + 11% rate • Class 3 (other relatives and non-relatives): $25,000 exemption + 15% rate These exemptions are MUCH MORE GENEROUS than pre-2023 ($40k Class 1, $15k Class 2, $10k Class 3 with 1%/13%/18% rates). No Nebraska estate tax (separate concept; not in effect). No gift tax.

Business considerations

Corporate income tax: 5.84% (2026), phasing to 3.99% flat by 2027 (Neb. Rev. Stat. §77-2734.02). LLC fee: $10 biennial report (Neb. Rev. Stat. §21-203) — one of the lowest in the US. Apportionment: single-sales factor for most industries (post-2017 reform). PTET: Available under LB 754 of 2023 — entity-level election at top individual rate; refundable credit to owners. Unemployment tax: 0%–5.4% on $9,000 wage base (very low base). The phase-down to 3.99% flat by 2027 will make Nebraska competitive with surrounding low-tax states (Iowa 3.8%, Missouri 4.7%, Kansas 5.58% top) — but the property tax + inheritance tax + convenience-of-employer rule keep Nebraska a moderately-burdensome jurisdiction overall.

Worked example: Hannah Becker, Omaha-based architectural-firm partner (single, 2026)

Hannah is a partner in an Omaha architecture firm. K-1 income $185,000. Owns a $400,000 Omaha home.

Federal: SE tax on guaranteed payments + federal income tax + §199A 20% QBI (architecture is NON-SSTB). Nebraska: Federal AGI flow: $185,000 Less standard deduction: $7,900 Less federal QBI conformity (20% × $185,000 = $37,000): $37,000 Nebraska taxable: $140,100 Tax (2026 brackets): $3,700 × 2.46% = $91 $18,470 × 3.51% = $648 $14,700 × 5.01% = $736 $103,230 × 5.20% = $5,368 Total: $6,843 Less: Property Tax Incentive Act credit (~30% of school district property taxes paid on her Omaha home). Estimated school portion of property tax: ~$5,000 Credit: $5,000 × 30% = $1,500 → reduces NE income tax to $5,343 Property tax on $400k Omaha home @ ~2.16%: ~$8,640/yr (headline) Net after credit: ~$7,140 Nebraska state income tax: $5,343 (after credit). If Hannah moves to neighboring South Dakota in 2026, the convenience-of-employer rule could still attribute most of her Nebraska firm income to Nebraska — careful sourcing required.

Statute references

• Personal income tax brackets (phasing to 3.99%) — Neb. Rev. Stat. §77-2715.03 (LB 754 of 2023)
• Military retirement exemption — Neb. Rev. Stat. §77-2716(15)
• Convenience-of-employer rule — Neb. Reg. 22-003.01C
• Sales tax 5.5% — Neb. Rev. Stat. §77-2701
• Economic nexus (Wayfair) — Neb. Rev. Stat. §77-2701.13(8)
• Homestead exemption — Neb. Rev. Stat. §77-3502
• Corporate income tax — Neb. Rev. Stat. §77-2734.02
• Inheritance tax — Neb. Rev. Stat. §77-2004

Related pages

• State Tax Comparison →
• Multi-State Allocation →
• PTET Analyzer →