Filing a federal income tax return can get complicated and it’s important to thoroughly understand tax laws so you don’t make mistakes. If you fail to file a return completely, you could face a penalty of 5% per month on your tax liability. You may also face this hefty fine if you erroneously claim the first-time homebuyer credit or exaggerate on how much you contributed to charitable organizations throughout the year.
In addition to learning the tax regulations imposed by the Internal Revenue Service (IRS), reviewing Nebraska tax laws is also important if you’re a resident. The state imposes a personal income tax, property taxes, sales taxes, and an inheritance tax. Review this guide to learn more about these tax guidelines so you can feel confident that you’re paying the right amount at the right time when tax season arrives.
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Nebraska Income Tax
Nebraska has a progressive income tax, also called a graduated tax, which means the tax bracket you’re in, and therefore the amount of income tax you’re responsible for paying increases as your income increases. This is different than a flat tax, which is one set income tax rate, no matter how much income you earn. The tax rate you pay is also determined by your filing status and ranges from 2.46% to 6.84%.
If you’re a single filer or you’re married but filing separately, you’re responsible for the following tax rates:
|Taxable Income||Tax Rate|
|$0 to $3,230||2.46%|
|$3,231 to $19,330||3.51%|
|$19,331 to $31,160||5.01%|
If you’re married and filing jointly with your spouse, the following tax rates apply:
|Taxable Income||Tax Rate|
|$0 to $6,440||2.46%|
|$6,441 to $38,680||3.51%|
|$38,681 to $62,320||5.01%|
If you’re filing as the head of household, you must pay the following tax rates:
|Taxable Income||Tax Rate|
|$0 to $6,020||2.46%|
|$6,021 to $30,940||3.51%|
|$30,941 to $46,200||5.01%|
If you’re a Nebraska resident who is required to file a federal income tax return, you must also file a state return. If you’re a nonresident or part-year resident who earned income in Nebraska, you must file a state return. File your federal tax return before attempting to complete your personal income tax return with the state.
Nebraska Sales Tax
When you purchase goods and certain services, a sales tax is added to the transaction. The retailer collects this extra revenue but it’s provided to the state and local governments to fund government activities and public services. Nebraska has a 5.5% statewide sales tax.
Most tangible property and certain services are subject to this sales tax, including but not limited to:
- Hotel rentals;
- Pest control services;
- Computer software.
If you make a purchase on taxable goods or services from an out-of-state seller, such as through a website or catalog order, you’re responsible for paying a use tax. Since the seller is likely not registered with the state of Nebraska, state sales tax may not be collected during your transaction. You must claim this transaction on your taxes and pay a 5.5% use tax to the state government.
Local Sales and Use Tax
Local jurisdictions in Nebraska are permitted to impose additional local sales tax on taxable transactions that occur in the area. Counties may impose a local sales tax of up to 2%.
For example, Douglas County, Scott’s Bluff, and Dodge County both impose a 1.5% local rate, so sales tax in these counties totals 7%. You can use the Nebraska Department of Revenue (DOR) Local Sales and Use Tax Rates guide to find out the sales tax you’re responsible for in your county.
Sales Tax Exemptions
Certain goods and services are exempt from sales tax in Nebraska. Some of the most important sales tax exemptions include the following:
- Coin-operated laundry machines;
- Medical equipment and medicine;
- Repair labor;
- Food for human consumption;
- Food served at schools or school-related functions;
- Garage sale transactions;
- Long-term lodging for 30 days or longer.
The Nebraska DOR provides a complete list of sales tax exemptions online.
Nebraska Property Taxes
If you own property in Nebraska, you’re responsible for paying property taxes to your county. The county assessor assigns a property value to your property based on its characteristics and current market value. The Nebraska Property Assessment Division administers all county property assessment programs and standards.
The property taxes you owe are calculated using a percentage of this property value and the county’s current tax rate. In 2019, the state’s average property tax rate was 1.7208%.
If you live in the home you own, you may qualify for a homestead exemption on your property taxes. This reduces your property tax liability by an amount that’s determined by your county tax collector and the qualifying category that applies to you. There are six categories that qualify you for a homestead exemption:
- Residents over 65 years of age;
- Disabled veterans injured due to a non service-related incident or illness;
- Residents who are disabled;
- Fully disabled veterans and their widow(er)s;
- Veterans whose homes were mostly sponsored by Department of Veterans Affairs (DVA) and their widow(er)s;
- Residents with developmental disabilities.
Depending on which eligibility category you qualify with, you may also be subject to meeting certain income limits and homestead value limits to obtain a homestead exemption.
Nebraska Estate Taxes
Nebraska doesn’t have an estate tax, so executors are not liable for taxes on the entire estate when the owner passes. However, the state does charge an inheritance tax, so beneficiaries are responsible for paying taxes on certain shares of the estate to transfer ownership after the owner passes away.
The inheritance tax rate you must pay depends on your relationship to the decedent. Surviving spouses and charities are exempt from paying inheritance taxes when transferring ownership of an estate. In other cases, the estate is taxed as follows:
- Immediate relatives, such as siblings or children: 1% inheritance tax and $40,000 exemption;
- Remote relatives, such as aunts or uncles: 13% inheritance tax and $15,000 exemption;
- Other types of transferees, even those unrelated to the decedent: 18% inheritance tax rate and $10,000 exemption.
Inheritance taxes are paid at the county level and must be paid within 12 months of the date of death.
Tips for Filing Taxes in Nebraska
State income tax returns are due on April 15 each year. You can file your income taxes online using the NebFile system. When you file online, you can create an account to check the status of your return and review past year’s returns. If you have questions about your taxes, you can contact your local tax office to obtain clarification and advice from a professional.
When preparing to file your taxes, gather the documents you’ll need, such as your W2 and bank account information. After reviewing the Nebraska tax system and regulations, you should have a better understanding of how your tax liability is calculated and what you owe this year.
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