Law Extends Tax Break on Social Security Benefits for Nebraskans

A new state law—strongly backed by AARP—will phase out state income tax on Social Security benefits. 

Up until now, Nebraska was one of 13 states that taxed Social Security income, placing a burden on many older residents on fixed incomes.

Nebraska already exempted Social Security income from state tax for married couples earning less than $59,100 a year and for singles making less than $44,460. The break will now extend to all residents receiving Social Security benefits. 

The gradual elimination begins with a reduction of 5 percent for this year, 20 percent in 2022, 30 percent in 2023, 40 percent in 2024 and 50 percent in 2025. The Legislature will review the tax break after five years to ensure the state has the revenue to expand the phaseout to 100 percent by 2030. The new law takes effect Sept. 1.

“Many middle-income seniors on fixed incomes are strongly contributing and supporting the economy in Nebraska while still paying taxes on their Social Security benefits,” said Todd Stubbendieck, AARP Nebraska’s state director. “AARP has long fought to lessen the burden of state tax on Social Security beneficiaries.”