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 4.55% and scheduled to keep falling.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes
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.
| Income source | How Nebraska treats it |
|---|---|
| Social Security | Not taxed. Fully exempt as of tax year 2024. |
| Pensions (private and public) | Taxed. |
| IRA and 401(k) withdrawals | Taxed. |
| Senior exclusion | No broad age-based exclusion. The headline relief is the full Social Security exemption. |
Social Security is now fully exempt in Nebraska. As of tax year 2024, the state does not tax any portion of your benefit.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes If you read an older guide that says Nebraska taxes part of your benefit, it is out of date.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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes So a retiree living on a pension and IRA draws owes Nebraska tax on those sources even though their Social Security is free.
One federal exception is worth knowing. As of tax year 2024, Nebraska also subtracts federal Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) annuities from taxable income, so retired federal employees get a break on that annuity income similar to the Social Security exemption.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes
There is no broad age-based exclusion replacing the old Social Security tax. Being 65 or older does not, by itself, shelter your pension or 401(k) income from Nebraska tax.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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 is 4.55% for tax year 2026 (down from 5.20% in 2025 and 5.84% in 2024), and it is scheduled to keep falling to 3.99% in 2027 under the same reform package, LB 754.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes Nebraska taxes income in graduated brackets, so only the top slice of a large withdrawal is taxed at that top rate.
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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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 4.55% for 2026.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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 4.55% top rate, the Nebraska tax is about $1,820.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.
Moved into or out of Nebraska mid-year? Part-year residents generally owe Nebraska tax only on the income they received while they were Nebraska residents, prorated on a part-year resident return. If a move is part of your care plan, confirm how your pension and account withdrawals get split with the Nebraska Department of Revenue before you file.
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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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 4.55% for 2026.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes 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.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes
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
Does Nebraska tax Social Security benefits?
No, not anymore. As of tax year 2024, Nebraska fully exempts Social Security from state income tax.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes LB 754 accelerated the full exemption from 2025 to 2024.
Does Nebraska tax pensions and 401(k) withdrawals?
Yes. Nebraska taxes pensions, IRA withdrawals, and 401(k) distributions.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes The Social Security exemption does not extend to these sources.
What is Nebraska's income tax rate?
The top rate is 4.55% for tax year 2026 (down from 5.84% in 2024), and it is scheduled to keep falling to 3.99% in 2027 under LB 754.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes Nebraska taxes income in graduated brackets, and taxable retirement income is taxed under that structure.
Is there a senior tax break in Nebraska besides Social Security?
The headline relief is the full Social Security exemption.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes Nebraska does not offer a broad age-based exclusion on pensions and retirement-account withdrawals.
Does Nebraska tax federal civil-service retirement?
As of tax year 2024, Nebraska subtracts federal Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) annuities from taxable income.revenue.nebraska.gov. (2023). 2023 Nebraska Legislative Changes (LB 754 rate schedule). Retrieved Jul 13, 2026, from https://revenue.nebraska.gov/about/2023-nebraska-legislative-changes Retired federal employees get a break on that annuity income, on top of the Social Security exemption.
How is retirement income taxed if I moved to or from Nebraska this year?
Part-year residents generally owe Nebraska tax only on the income they received while they were Nebraska residents, reported on a part-year resident return. Confirm how your pension and account withdrawals get split with the Nebraska Department of Revenue before you file.
Learn More
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.