What Retirees Need to Know About Social Security and Taxes in Nebraska

If you’re planning your retirement income in Nebraska, here’s the short answer: no. As of tax year 2024, Nebraska no longer taxes Social Security benefits at the state level — for any retiree, regardless of income. If you’re deciding whether to retire in Nebraska, or you already live here and are mapping out your retirement income strategy, this is one of the most significant, and most recent, pieces of good news for your bottom line.

Here’s what changed, how Nebraska got here, and what it actually means for your retirement plan.

How Nebraska Got to a Full Social Security Tax Exemption

Nebraska’s Social Security tax break didn’t happen all at once; it was the result of three separate bills, each one moving faster than the last.

It started with LB 64 in 2021, which set up a slow, multi-year phase-out of Nebraska’s Social Security tax, originally scheduled to reach full exemption by 2030. Lawmakers didn’t wait that long. LB 873 in 2022 sped up the timeline considerably, raising the exemption to 40% for 2022, 60% for 2023, 80% for 2024, and 100% by 2025. Then LB 754 in 2023 accelerated it one more time, pulling full exemption forward a full year, from 2025 to tax year 2024.

The net effect: starting with 2024 tax returns (the ones filed in early 2025), Nebraska retirees have paid no state income tax at all on their Social Security benefits. There’s no income cap or phase-out threshold attached to it, the exemption applies whether your household income is $30,000 or $300,000.

For context, Nebraska joins a growing list of states that have dropped Social Security taxation in recent years. As of 2026, only a handful of states, Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont- still tax Social Security benefits in some form, and most of those apply exemptions or income thresholds that shield a majority of retirees anyway.

Does This Apply to Everyone, or Are There Income Limits?

This is the question we hear most often, and it’s an easy one: yes, it applies to everyone. Unlike some states that only exempt Social Security for retirees below a certain income level, Nebraska’s exemption is full and unconditional. Whether you’re relying primarily on Social Security or drawing significant income from other sources, your benefits are not subject to Nebraska state income tax.

Keep in mind this only addresses state taxes. Social Security benefits can still be subject to federal income tax, depending on your combined income from all sources, that calculation hasn’t changed and is a separate question from what’s covered here.

What This Means for Your Retirement Income Plan

A tax law change like this isn’t just trivia; it can genuinely change how a retirement income plan should be built. A few things worth thinking through with your advisor:

Withdrawal order matters more, not less.
- With Social Security fully off the table for state taxes, the relative tax cost of pulling income from a traditional IRA, a Roth account, or a taxable brokerage account becomes a bigger factor in sequencing your withdrawals efficiently.
Roth conversion strategy may look different.
- Because Nebraska’s overall income tax picture has been shifting (the state’s top individual income tax rate has also been declining as part of the same broader tax relief package), the math on Roth conversions in your early retirement years is worth revisiting rather than assuming your old projections still hold.
This is a good moment for a plan check-in.
- If your retirement income projections were built before 2024, they may still be assuming a level of state taxation on your Social Security benefits that no longer applies, which could mean your plan is more tax-efficient than you think, or that you have room to adjust your strategy elsewhere.

What About Pensions, 401(k)s, and Other Retirement Income in Nebraska?

It’s worth being clear about what this exemption does not cover. Nebraska still fully taxes withdrawals from pensions, 401(k)s, 403(b)s, traditional IRAs, and most other retirement accounts, at the same rates as ordinary income. There’s no equivalent phase-out for these income sources.

Two notable exceptions: military retirement pay and Railroad Retirement benefits are both exempt from Nebraska state income tax, separate from this Social Security change.

If pensions or retirement account withdrawals make up a meaningful part of your income, that’s a conversation worth having on its own; the tax treatment is meaningfully different from Social Security, and it affects how much of your retirement income actually reaches your pocket.

Frequently Asked Questions:

Does Nebraska tax Social Security benefits in 2026?

No. Nebraska has fully exempted Social Security benefits from state income tax since tax year 2024, and that remains current law.

Is there an income limit on Nebraska's Social Security tax exemption?

No. The exemption applies to all Nebraska taxpayers regardless of income level.

Do I need to file anything special to claim the exemption?

No separate application is required — the exemption is applied automatically when you file your Nebraska state income tax return, following the Department of Revenue’s current instructions.

Does Nebraska tax pensions or 401(k) withdrawals?

Yes. Unlike Social Security, pension income and retirement account withdrawals are still fully taxable at Nebraska’s standard income tax rates, with the exception of military retirement pay and Railroad Retirement benefits, both of which are exempt.

Will Social Security still be taxed at the federal level?

Possibly. Nebraska’s exemption only removes state income tax. Whether your benefits are subject to federal income tax still depends on your combined income under separate federal rules.

Talk Through What This Means for Your Plan

Tax law changes like this one are exactly the kind of detail that can shift a retirement income strategy, but only if your plan actually accounts for it. If you’d like to talk through how Nebraska’s Social Security tax exemption affects your specific situation, schedule a conversation with our team. We’re happy to walk through what it means for your withdrawal strategy, your tax picture, and your overall retirement plan.

NOTE: This article is intended for general educational purposes and does not constitute personalized tax or financial advice. Tax laws are subject to change; consult a qualified tax professional or your financial advisor regarding your specific circumstances. Nelson Murphy Insurance & Investments LLC does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.

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