Nebraska income tax rates and brackets, 2026.

Nebraska fully exempts Social Security benefits from state income tax, a change phased in between 2022 and 2025. Previously, Nebraska was one of only a few states that taxed Social Security. This exemption benefits approximately 300,000 Nebraska Social Security recipients. Other retirement income (pensions, 401(k)s, IRAs) remains taxable at the graduated rates.

Nebraska's sales tax rate is 5.50% at the state level with local additions bringing the average combined rate to approximately 6.94%. Groceries are exempt from sales tax. Nebraska also exempts Social Security income from both income tax and does not tax it as part of AGI for sales tax purposes.

Property taxes in Nebraska are among the highest in the nation, with an average effective rate of approximately 1.61%. Property taxes primarily fund public schools and local government, and rates vary significantly by county. The high property tax rate is Nebraska's most-discussed tax issue, and the legislature has been working on relief measures including an income tax credit for property taxes paid. The Property Tax Credit is claimed on the state income tax return and provides a refund based on school district property taxes paid.

Nebraska's cost-of-living index is approximately 90, about 10% below the national average. Omaha is the largest metro area and offers a strong job market (home to Berkshire Hathaway, Mutual of Omaha, Union Pacific) with affordable housing. Lincoln (state capital and home to the University of Nebraska) is also very affordable.