Updated State Tax Guide for Nebraska, 2025 Edition
Nebraska, known as the Cornhusker State, is more than just its agricultural landscape. It also boasts a unique tax system that sets it apart from many other states. Here's a breakdown of Nebraska's tax landscape, focusing on property taxes, inheritance taxes, and sales taxes.
Firstly, it's important to note that Nebraska has property taxes that exceed the national average. The average effective property tax rate in Nebraska is 1.43%, which is approximately 1.75% of the property's assessed value. However, homeowners aged 65 and older, as well as those with disabilities, can benefit from a homestead exemption. More information about this exemption can be found in the Homestead Exemption Information Guide.
Nebraska is one of six states with an inheritance tax. The tax applies to many types of heirs, including children, parents, grandchildren, siblings, and grandparents, who are subject to a 1% tax on inheritances over $100,000. Aunts, uncles, nieces, and nephews pay an 11% tax on inheritances over $40,000. Other heirs are responsible for a 15% inheritance tax on amounts over $25,000.
When it comes to sales taxes, Nebraska's state sales tax rate is 5.5%, with localities adding up to 1.47%, making the average combined rate 6.97%. Cigarettes are taxed at $0.64 per pack, while other tobacco products are taxed at 20% of the wholesale price. Beer is taxed at $0.31 per gallon, wine at $0.95 per gallon, and liquor at $3.75 per gallon.
Nebraska has a graduated state individual income tax rate, ranging from 2.46% to 5.84%. Notably, the top rate of Nebraska's income taxes saw a drop in 2024, with a gradual reduction continuing through 2027. The state does not tax military retirement income or Railroad Retirement benefits, but 401(k) and IRA distributions are taxable. Pensions are exempt from taxation in Nebraska.
Data for this state tax guide was gathered from the Census Bureau, the state's government website, the Sales Tax Handbook, and the Tax Foundation. It's always advisable for residents to consult these resources for the most accurate and up-to-date information.
In conclusion, understanding Nebraska's tax system is crucial for both residents and those considering relocation. While the state has property taxes that exceed the national average, it offers various exemptions and benefits, such as the homestead exemption and the exemption of Social Security retirement benefits from taxation. Additionally, the state's sales tax and inheritance tax structures are unique compared to many other states.
