Nebraska Tax Rates

This post provides an overview of the primary taxes levied at the state level in Nebraska. The information contained here is intended for general reference. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, Indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Nebraska imposes a graduated state individual income tax system with four tax brackets, though the state is currently phasing in rate reductions.

  • State Rates (2025): The rates range from a low of 2.46% to a top marginal rate of 5.84% (effective for the 2025 tax year, reduced from 5.94% in 2024). The top rate applies to taxable income exceeding $68,000 for married couples filing jointly and $34,000 for single filers.
  • Tax Relief Goal: The state legislature is pursuing a policy goal of gradually reducing the top income tax rate to 3.99% by 2027, subject to revenue triggers.
  • Retirement Income: A key tax benefit is the full exemption of all retirement income from state income tax. This includes income from Social Security benefits, military retirement pay, pensions, 401(k)s, and IRAs.
  • Local Income Tax: Nebraska does not impose a local or county income tax.

Sales and Use Tax

Sales tax is a key revenue source, combining a state rate with local additions.

  • State Rate: The general state sales tax rate is 5.50% on the retail sale of tangible personal property and certain specified services.
  • Local Taxes: Local jurisdictions (cities and counties) impose an additional local sales tax, typically in increments of 0.5% or 1.0%. The maximum local rate allowed is 2.0%.
  • Combined Rate: The combined state and local sales tax rate can reach up to 7.5% in municipalities that impose the maximum local tax. The average combined rate is approximately 6.94% statewide.
  • Exemptions: Essential items like groceries (unprepared food for home consumption) and prescription drugs are exempt from the state sales tax.
  • Use Tax: A state use tax of 5.50% applies to taxable items purchased outside of Nebraska but used, stored, or consumed in the state if Nebraska sales tax was not collected.

Property Tax (Ad Valorem Tax)

Property taxes in Nebraska are collected exclusively at the local level by various taxing bodies (school districts, counties, etc.), and they are among the highest in the nation as a percentage of home value.

  • Assessment: Agricultural land is assessed based on its income-producing capacity, while other real property (residential and commercial) is assessed at 100% of its market value.
  • School Funding: Property taxes are the primary source of funding for Nebraska’s public schools, which contributes to the high mill levies.
  • Tax Calculation: The tax owed is calculated by applying the local mill rate (set by local budgets) to the property’s assessed value. Total property tax levies are subject to some statutory caps.
  • Property Tax Credit Fund: The state provides property tax relief through a refundable income tax credit calculated based on the property taxes paid for school district purposes, which provides a direct offset to homeowners and agricultural producers.

Corporate Income Tax

Nebraska imposes a tax on the net income of corporations that conduct business in the state.

  • Tax Rates: The corporate income tax system has two brackets:
    • A reduced rate of 4.70% on the first $100,000 of taxable income.
    • A top marginal rate of 5.84% on income exceeding $100,000. These rates are subject to the same phased-in reductions as the individual income tax, with a goal of reaching a top rate of 3.99% by 2027.
  • Apportionment: For multi-state corporations, Nebraska uses a single sales factor apportionment method to determine the amount of income taxable in the state, based solely on the proportion of sales made in Nebraska.

Unique and Miscellaneous Taxes

  • Estate Tax: Nebraska is one of the states that imposes a state inheritance tax (not an estate tax) on the property received by certain beneficiaries, with the rate depending on the beneficiary’s relationship to the decedent. Immediate family members are typically exempt or subject to a lower rate.
  • Motor Fuel Tax: A per-gallon tax is levied on motor fuels, set at approximately 36.3 cents per gallon for gasoline.
  • No Corporate Franchise Tax: Nebraska does not impose a corporate franchise tax or net worth tax.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.