Nebraska Retirement Income Tax: 2026 Senior Guide

Nebraska just stopped taxing Social Security. As of tax year 2024, the benefit is fully exempt, a year earlier than originally planned. The Nebraska retirement income tax still applies to pensions, IRA withdrawals, and 401(k) distributions, taxed at rates topping out at 5.84% and scheduled to keep falling.

This guide explains what the new Social Security exemption covers, what Nebraska still taxes, and what the falling rates mean for care withdrawals.

Nebraska Retirement Income Tax at a Glance

Here is how Nebraska handles each common source of retirement money.

Social Security is now fully exempt in Nebraska. As of tax year 2024, the state does not tax any portion of your benefit. This is a recent change, accelerated under LB 754 from 2025 to 2024, so older guidance may still describe a partial tax.

Pensions, IRA withdrawals, and 401(k) distributions remain taxable. The relief is the Social Security exemption, not a broad break on every retirement source, which we explain next.

Nebraska Retirement Income Tax: How It Works

Nebraska reached a full Social Security exemption in tax year 2024. LB 754 accelerated the phase-out of the tax by a year, bringing 100% exemption forward from 2025 to 2024. If you read an older guide that says Nebraska taxes part of your benefit, it is out of date.

That makes the benefit itself untaxed by the state. A retiree collecting $30,000 in Social Security owes Nebraska nothing on it. The change put Nebraska in line with the majority of states that exempt Social Security entirely.

Pensions and Retirement Accounts Are Still Taxed

The exemption is specific to Social Security. Nebraska still taxes other retirement income, including pensions, IRA withdrawals, and 401(k) distributions. So a retiree living on a pension and IRA draws owes Nebraska tax on those sources even though their Social Security is free.

There is no broad age-based exclusion replacing it. Being 65 or older does not, by itself, shelter your pension or 401(k) income from Nebraska tax. The headline relief for retirees is the Social Security exemption, full stop.

This is the key distinction to keep straight. Social Security: untaxed. Pension, IRA, and 401(k): taxed. Sorting your income into those two buckets tells you what Nebraska will and will not tax.

A Top Rate That Is Falling

Nebraska's top income tax rate was 5.84% for 2024, with 5.58% applying to the first $100,000 of income. The rate is scheduled to keep falling in later years under the same reform package.

So the trend is in retirees' favor. The taxable part of your retirement income, your pension and account withdrawals, is taxed at a top rate that is set to decline over time. Pair that with the new Social Security exemption and Nebraska has grown noticeably friendlier to retirees in a short span.

What This Means for Paying for Care

If you are drawing on retirement savings to pay for senior care, Nebraska taxes those withdrawals, but the full Social Security exemption keeps the rest of your income lighter.

A 401(k) or IRA withdrawal to cover assisted living is taxable at Nebraska's rates, topping out at 5.84% for 2024. Because Social Security is now exempt, a large withdrawal does not drag your benefit into the taxable column the way it does in states that tax Social Security.

Put a number on it. On a $40,000 IRA withdrawal taxed near the 5.84% top rate, the Nebraska tax is about $2,336. With the rate scheduled to fall in later years, the same withdrawal may cost a bit less down the road.

The federal side is separate. A large withdrawal still raises your federal taxable income, which can lift your federal tax and your Medicare premiums two years out. So even though Nebraska no longer taxes your Social Security, the federal consequences of a big withdrawal deserve planning.

For the federal mechanics, including the early-withdrawal penalty and required distributions, see our guide to using retirement accounts for care. To sequence your income sources sensibly, see building a senior care funding plan. If you are just starting to map the money, begin with how to pay for senior care.

A tax professional can run your full picture, state and federal, before you withdraw large sums.

Where Nebraska Stands for Retirees

Nebraska has moved firmly toward retiree-friendly. The full Social Security exemption as of 2024 is the big change, putting the state in line with the majority that protect the benefit. For a Social-Security-reliant retiree, that is a meaningful drop in the state tax bill.

The remaining cost is on pensions and account withdrawals. Nebraska still taxes those, with no broad age-based exclusion, at a top rate of 5.84% for 2024. A retiree with a large pension or heavy IRA draws still owes real state tax.

But the direction matters. The top rate is scheduled to keep falling, so the cost on taxable retirement income should ease over time.

The takeaway: Nebraska is a better deal for retirees than it was a few years ago. Social Security is fully exempt, and the rate on what is still taxed is on its way down. Plan around the pension and 401(k) tax, but know the trend is in your favor.

Frequently Asked Questions

Learn More

• Nebraska Senior Property Tax Relief
• Nebraska Inheritance Tax
• How Each State Taxes Retirement Income
• How to Pay for Senior Care
• Building a Senior Care Funding Plan
• Using Retirement Accounts to Pay for Care

Find personalized help planning how to pay for senior care at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.