Nebraska Retirement Income Taxes in 2026: What's Taxable and What's Not
By Justin Anderson, AAMS | Cambridge Advisors Inc. · November 2026
Nebraska doesn’t tax Social Security benefits. But traditional IRA and 401(k) withdrawals, along with most private pensions, generally remain subject to state income tax to the extent included in federal adjusted gross income (AGI).
Two retirees with similar income and investments can have different Nebraska tax bills depending on how they receive their money.
Nebraska’s top individual income tax rate is 4.55% for 2026. Under current law, the third and fourth bracket rates fall to 3.99% in 2027. The lower brackets remain graduated; 3.99% is not a flat tax on all income.
Nebraska retirement income tax table
Nebraska starts with federal AGI, then applies state additions and subtractions. The table describes general treatment for full-year Nebraska residents, not every possible adjustment.
| Income type | Nebraska treatment for 2026 | Authority / 2025 income-tax Schedule I |
|---|---|---|
| Social Security benefits | Not taxed. Subtract the portion included in federal AGI. The full subtraction began in 2024. | § 77-2716(14); line 31 |
| Military retirement benefits | Qualifying benefits included in federal AGI are fully excluded since 2022. No special election; documentation may be required. | § 77-2716(15); line 32 |
| Federal CSRS annuity | Exclude amounts earned from federal employment to the extent included in federal AGI, beginning in 2024. | § 77-2716(20); line 38 |
| Federal FERS annuity | Generally taxable. A documented qualifying uniformed-service portion may qualify for the military-retirement exclusion. | § 77-2716(15), (20); DOR military guidance |
| Railroad Retirement Board benefits | Subtract federally taxable RRB retirement benefits, including Tier I and Tier II. | DOR booklet; line 18 |
| Traditional IRA distributions | Generally taxable to the extent included in federal AGI; after-tax basis and qualifying exclusions may change the amount. | Federal IRA rules; § 77-2716 |
| 401(k), 403(b) and similar plans | Generally taxable to the extent included in federal AGI. | § 77-2716 |
| Private employer pensions | Generally taxable to the extent included in federal AGI. | § 77-2716 |
| Roth IRA conversions | Taxable traditional-account amounts transferred to a Roth generally are subject to Nebraska income tax. See timing note below. | Federal Roth rules; § 77-2716 |
| Qualified Roth IRA distributions | Generally not taxable; excluded from federal AGI. | IRS Publication 590-B |
| Qualifying U.S. government interest | Generally subtracted when included in federal AGI. Gains from selling the obligations generally do not qualify. | § 77-2716(1); lines 15-16 |
| Other states’ municipal bond interest | Federally exempt interest generally must be added back for Nebraska purposes. | § 77-2716(1)(c)-(d); lines 1-3 |
| Nebraska municipal bond interest | Generally exempt from federal and Nebraska income tax. Special rules apply to federally taxable Nebraska bonds. | § 77-2716(1); DOR booklet |
| Other interest, dividends and capital gains | Generally taxable, subject to specific exclusions. | §§ 77-2716, 77-2715.09 |
| Certain employer-stock gains / extraordinary dividends | May qualify for a limited special election; not a general capital-gains exclusion. | § 77-2715.09; line 19 |
| Certain retired public-safety health premiums | Potential subtraction for qualifying retired firefighters or certified law enforcement officers; age, service and deduction limits apply. | § 77-2716(19); line 36 |
Line references are from the 2025 income-tax Schedule I, not the homestead income statement. Use the applicable 2026 return instructions when filing.
A few distinctions deserve closer attention
CSRS and FERS are different. For tax years beginning in 2024, the civilian federal-annuity subtraction applies to CSRS, not FERS. Separately, DOR describes a military-retirement exclusion for the qualifying uniformed-service portion of certain FERS benefits where retired military pay was waived and military service added to civilian service. Government documentation must support the allocation.
Military retirement extends beyond Department of Defense payments. Qualifying service may include the Coast Guard, Public Health Service Commissioned Corps and NOAA Commissioned Officer Corps. Eligibility depends on the benefits and supporting records.
Qualified Roth distributions differ from conversions. A qualified Roth IRA distribution meets the applicable five-tax-year period and a qualifying condition, such as age 59½. A taxable traditional-to-Roth transfer generally creates income. Income generally belongs to the traditional-account distribution year; completing an eligible 60-day rollover in January does not move a December distribution into the next tax year.
Special exclusions have limits. The employer-stock election is limited by statute. Nebraska also adjusts qualifying net gains and losses from gold or silver bullion: qualifying gains are subtracted and qualifying losses added back to the extent included in federal AGI. The adjustment does not apply to taxable retirement-plan distributions holding bullion.
Nebraska income tax rates for 2026
These thresholds apply to Nebraska taxable income after adjustments and deductions. The two upper statutory brackets both have a 4.55% rate.
| Filing status | 2.46% | 3.51% | 4.55% |
|---|---|---|---|
| Single | $0-$4,130 | Over $4,130 to $24,760 | Over $24,760 |
| Married filing jointly | $0-$8,250 | Over $8,250 to $49,530 | Over $49,530 |
| Head of household | $0-$7,700 | Over $7,700 to $39,620 | Over $39,620 |
The fourth-bracket breakpoints are $39,900 single, $79,800 joint and $59,160 head of household. Crossing them does not change the 2026 marginal rate. These are estimated-tax figures from 2026 Form 1040N-ES; use final return tables to file.
2026 deductions and personal exemption credit
| Provision | Amount |
|---|---|
| Standard deduction: single / married filing separately | $8,850 |
| Standard deduction: married filing jointly | $17,700 |
| Standard deduction: head of household | $12,950 |
| Additional standard deduction: single or head of household | $2,050 for age 65 or older; another $2,050 if blind |
| Additional standard deduction: married / qualifying surviving spouse | $1,700 for each applicable age or blindness condition |
| Personal exemption credit | $176 per qualifying exemption |
Age and blindness additions can stack. For example, a married couple both age 65 or older receives a $3,400 age addition; blindness may add more. Special spouse rules apply when filing separately. These Nebraska amounts are distinct from federal deductions.
Source: 2026 Form 1040N-ES, pp. 4-6. Its rate schedule is for estimating payments, not computing tax on an actual return. Consult final 2026 return instructions when available.
Example: From federal AGI to Nebraska AGI
Assume a hypothetical married couple, both age 67, has the following amounts already included in federal AGI. This is an income reconciliation, not a calculation of their tax.
| Income source | Federal AGI | Subtraction | Nebraska AGI |
|---|---|---|---|
| Taxable Social Security | $44,200 | $44,200 | $0 |
| Traditional IRA | $40,000 | $0 | $40,000 |
| Private pension | $24,000 | $0 | $24,000 |
| Qualifying Treasury interest | $3,000 | $3,000 | $0 |
| Other interest / dividends | $6,000 | $0 | $6,000 |
| Total | $117,200 | $47,200 | $70,000 |
The subtraction removes about 40.3% of federal AGI ($47,200 ÷ $117,200). Nebraska AGI is not Nebraska taxable income or the tax bill; deductions and credits still apply.
All amounts are hypothetical. $44,200 is the assumed federally taxable Social Security amount, not total benefits. The example assumes no other income or adjustments and does not calculate federal taxation, tax savings or results of a Cambridge service.
What these rules mean for retirement planning
A retiree needing another $30,000 for spending can create different tax results depending on the source. A traditional IRA distribution generally adds income only to the extent taxable. A qualified Roth IRA distribution generally does not. A $30,000 brokerage sale generally creates income based on realized gains or losses, not the full proceeds.
No withdrawal source is best for everyone. Spending Roth assets reduces the tax-free assets available later; selling investments can realize gains; preserving traditional accounts can increase future required distributions. Compare taxes, liquidity, investment risk and the assets left for later years.
Nebraska exclusions don’t settle federal taxes
Federal rules may tax up to 85% of Social Security benefits even though Nebraska excludes them. That means up to 85% of benefits may enter taxable income, not that benefits face an 85% tax rate.
A Roth conversion generally increases federal AGI in the distribution year. It can affect the taxable portion of Social Security, future required distributions and Medicare income-related premiums. Medicare generally uses income from two years earlier. Compare the combined cost before choosing an amount or year.
Income-tax-exempt money can still count elsewhere
Nebraska’s homestead exemption uses a separate household-income measure based on the prior year. It generally counts all Social Security retirement benefits, taxable IRA distributions and Roth conversions, Treasury interest and Nebraska municipal bond interest. Qualified Roth IRA distributions generally do not count.
Medicare income-related premiums and the federal Social Security taxation formula also count tax-exempt municipal interest. A state or federal income-tax exclusion does not establish eligibility under another program.
For example, income from a 2026 conversion generally affects a 2027 homestead application and 2028 Medicare premiums. Apply the thresholds for those years; current thresholds are not forecasts.
A note on charitable IRA transfers
An IRA owner age 70½ or older may make a qualifying direct transfer to an eligible charity. Subject to the annual limit and other requirements, a qualified charitable distribution is excluded from federal AGI and generally Nebraska income. It can count toward an RMD once RMDs apply. It is not a Roth conversion or a second charitable deduction.
Frequently asked questions
Does Nebraska tax Social Security benefits?
No. Since 2024, Nebraska subtracts 100% of benefits included in federal AGI. Federal taxation and homestead household-income rules are different.
Does Nebraska tax IRA and 401(k) withdrawals?
Generally yes, to the extent included in federal AGI. After-tax basis and qualifying exclusions can change the taxable amount. Qualified Roth IRA distributions generally are not taxable.
Does Nebraska tax pension income?
Most private pensions and FERS annuities are taxable to the extent included in federal AGI. Qualifying military retirement, CSRS annuities and RRB retirement benefits receive exclusions.
Does Nebraska tax military retirement pay?
Qualifying benefits included in federal AGI have been fully excludable since 2022. No special election is required; supporting documentation may be necessary.
Putting the rules to work
Coordinate withdrawals, Social Security, investments and taxes across the years they affect. Cambridge Advisors can help you examine these decisions as part of retirement income planning and coordinate with your tax professional.
Contact Cambridge Advisors to discuss an introductory conversation.
Important disclosures
Cambridge Advisors Inc. is a fee-only investment adviser registered with the U.S. Securities and Exchange Commission and based in Omaha, Nebraska. Registration does not imply a particular level of skill or training. This article is for general educational and informational purposes. It is not personalized investment, tax, accounting or legal advice and does not recommend a particular investment or tax strategy. Cambridge Advisors provides financial planning and investment advisory services but does not provide tax or legal advice. Tax laws and interpretations can change; individual results depend on specific circumstances. Examples are hypothetical and do not guarantee tax outcomes. Investing involves risk, including possible loss of principal. Fees and expenses reduce investment returns. Consult qualified tax and legal professionals about your circumstances. Information about advisory services, fees and conflicts is available in Form ADV and Form CRS at adviserinfo.sec.gov. Reading this article does not create an advisory relationship.
Primary sources
Rules and administrative guidance checked October 29, 2026. Sources below support the tax discussion; estimated-tax schedules do not replace filing instructions. Government references do not imply endorsement.
- Neb. Rev. Stat. § 77-2716 - Nebraska Legislature; enacted law, current text checked October 29, 2026. Retirement and investment-income adjustments, subsections (1), (14), (15), (19), (20).
- Neb. Rev. Stat. § 77-2715.03 - Nebraska Legislature; enacted law, current text checked October 29, 2026. Third and fourth rates: 4.55% in 2026; 3.99% from 2027.
- 2026 Form 1040N-ES - Nebraska DOR; Rev. 11-2025; pp. 4-6. Checked October 29, 2026. Estimated-payment brackets, deductions, age/blindness additions and $176 exemption credit.
- 2025 Individual Income Tax Booklet and Schedule I - Nebraska DOR; January 2026. Checked October 29, 2026. Schedule I lines 1-3, 15-16, 18-19, 31-32, 36, 38 and 43; instructions on Treasury gains, retirement exclusions and bullion.
- Military Retirement Benefits Exclusion - Nebraska DOR; undated current administrative guidance, checked October 29, 2026. FERS military-service allocation, documentation, eligibility and no-election rule.
- 2024 Nebraska Legislative Changes - Nebraska DOR; 2024 legislation summary, checked October 29, 2026. LB 1317 limits civilian annuity subtraction to CSRS, excluding FERS.
- Neb. Rev. Stat. § 77-2715.09 - Nebraska Legislature; enacted law, checked October 29, 2026. Limited employer-stock/extraordinary-dividend election.
- 2026 Form 458 Schedule I - Income Statement - Nebraska DOR; 2026 application form, checked October 29, 2026. Prior-year household-income calculation, including Social Security and exempt interest.
- Publication 590-B (2025), Distributions from IRAs - IRS; 2025 edition, checked October 29, 2026. IRA basis, qualified Roth distributions and QCD requirements.
Additional federal sources: IRS Publication 590-A (2025), Roth conversions and rollovers, irs.gov/publications/p590a; SSA, Medicare premiums for higher-income beneficiaries, ssa.gov/benefits/medicare/medicare-premiums.html. Checked October 29, 2026.