Income Taxes in Nebraska
Nebraska's income tax is a four-bracket graduated system actively falling under 2023's Legislative Bill 754 -- a 4.55% top rate for 2026, already legislated to drop to 3.99% in 2027 -- paired with a full exemption of Social Security income and a simple, complete exemption of military retirement pay, a genuinely rare combined retiree benefit.
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Learn moreA four-bracket system, and it's actively falling
Nebraska's individual income tax runs four graduated brackets for tax year 2026 (single filers): 2.46% on the first $3,990 of taxable income, 3.51% on $3,990-$23,930, 4.40% on $23,930-$38,580, and a top marginal rate of 4.55% on income above $38,580, per the Nebraska Department of Revenue's own rate chronology. This top rate has fallen every year recently -- from 6.84% in 2022 to 6.64% in 2023, 5.84% in 2024, and 5.20% in 2025 -- under 2023's LB 754, and the schedule continues: the top rate is legislated to drop further to 3.99% for tax year 2027, with the corporate rate on a parallel path.
Social Security is fully, unconditionally exempt
Nebraska completed a real, dated phase-out of state taxation on Social Security benefits: Social Security income has been 100% exempt from Nebraska state income tax beginning tax year 2024, the end point of a multi-year phase-down enacted in 2022. Unlike states that exempt Social Security only below an income threshold, Nebraska's exemption carries no income cap -- a genuinely complete carve-out.
Military retirement pay is also fully exempt, with no election required
Nebraska offers a real, distinct, and genuinely simple military-retirement-income exemption: for tax years beginning on or after January 1, 2022, all military retirees may exclude 100% of military retirement benefits from Nebraska taxable income, to the extent included in federal AGI, with no election or special form required to claim it. Combined with the full Social Security exemption, this makes Nebraska a real, disclosed draw for military retirees, particularly given Offutt Air Force Base's substantial presence in the Omaha metro.
Nebraska's labor-market backdrop
Nebraska's unemployment rate ran a real, current, genuinely strong 3.0% (seasonally adjusted) as of January 2026 -- the sixth-lowest in the nation, and a full 1.3 percentage points below the 4.3% national rate the same month -- a favorable labor-market reading worth weighing alongside Nebraska's falling income-tax trajectory.
Key takeaways
- Nebraska's income tax is a four-bracket system for 2026: 2.46% to 4.55%, already legislated under LB 754 to fall further to a flat 3.99% in 2027.
- Social Security income has been 100% exempt from Nebraska state income tax since tax year 2024, with no income cap.
- Military retirement pay has been 100% exempt since 2022, with no election or special form required to claim it -- a genuinely rare combined retiree benefit alongside the Social Security exemption.
- Nebraska's unemployment rate ran 3.0% in January 2026, the sixth-lowest in the nation and 1.3 points below the national rate.
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