Retirement benefits and the Nebraska return, which is a different question from FICA on wages
People ask "does Nebraska tax Social Security?" and mean two opposite things. One is the 6.2% taken from wages to fund Social Security. That is FICA. It is federal, it is on the paycheck, and Nebraska does not layer a state version on top of it. The other is the monthly benefit paid to a retiree, a survivor, or a disabled worker. That benefit is what this page is about.
Social Security benefits are fully exempt from Nebraska income tax, and that exemption has applied starting in 2024. A benefit that shows up in federal adjusted gross income is subtracted for Nebraska. The subtraction does not depend on a city. Omaha and Lincoln do not tax the benefit either, because Nebraska has no local wage tax and no local tax on benefits.
If the question was the 6.2% line on a paycheck, stop here and read FICA Social Security and Medicare. The rest of this page will not explain the wage base. It will explain the benefit.
Exempt means the benefit is not in Nebraska taxable income. It does not mean the federal government ignores the benefit. It does not mean a job you still hold in Nebraska is exempt. It does not mean FICA stops because a benefit started. Wages are still wages. The benefit is not a wage.
The return is Form 1040N. Withholding on a paycheck never sees the benefit, because the benefit is not in the payroll. That is why a retiree with only Social Security and no other Nebraska income is not looking at a pay stub to answer this question. The comparison between the stub and the return, for people who have both, is Nebraska Form 1040N vs paycheck withholding.
The brackets on the return still exist for other income. The exemption removes the benefit before those brackets matter for that income. The tier structure itself is Nebraska income tax brackets. This page does not restate the tiers.
Federal income tax uses a combined-income test that has not been indexed for inflation. Combined income is adjusted gross income, other than the taxable benefit itself, plus tax-exempt interest, plus half of Social Security benefits. For a single person, combined income under $25,000 leaves the benefit untaxed federally. Between $25,000 and $34,000, up to 50% of the benefit can be included. Over $34,000, up to 85% can be included. For a married couple filing jointly, the two thresholds are $32,000 and $44,000. Married filing separately, if you lived with your spouse at any time during the year, is a harsher federal rule and is easy to get wrong. This page's example stays with a single filer.
"Up to" matters. Crossing a threshold does not make the whole benefit taxable at 50% or 85%. The worksheet includes the smaller of two amounts in the middle band.
| Filing status | Combined income | Federal treatment of the benefit |
|---|---|---|
| Single | Under $25,000 | None of the benefit is included |
| Single | $25,000 to $34,000 | Up to 50% may be included |
| Single | Over $34,000 | Up to 85% may be included |
| Married filing jointly | Under $32,000 | None of the benefit is included |
| Married filing jointly | $32,000 to $44,000 | Up to 50% may be included |
| Married filing jointly | Over $44,000 | Up to 85% may be included |
Suppose a single person has $20,000 of other income, no tax-exempt interest, and $18,000 of Social Security benefits. Half of the benefit is $9,000. Combined income is $20,000 plus $9,000, or $29,000. That sits between $25,000 and $34,000, so the federal worksheet uses the 50% band.
The amount included is the smaller of half the benefit, which is $9,000, and half of the amount by which combined income exceeds $25,000. Combined income exceeds $25,000 by $4,000. Half of $4,000 is $2,000. The smaller figure is $2,000. Federal taxable Social Security in this illustration is $2,000, not $9,000 and not $18,000.
Nebraska's exemption takes that federally included benefit back out. Nebraska income tax on the $2,000 of benefits is zero. Nebraska can still tax the $20,000 of other income if that other income is taxable in Nebraska. The exemption is aimed at the benefit, not at a pension, not at wages, and not at interest.
This illustration is the federal worksheet applied to round numbers. It is not a filled-in 1040N, and it is not a withholding result. The paycheck tools on this site do not accept a benefit amount.
Social Security pays the benefit directly. The form is an SSA-1099, not a W-2 from an employer in Omaha. There is no Nebraska withholding table for the monthly deposit, because the state is not taxing it. If someone withholds federal tax from the benefit at your request, that is a federal election on the benefit. It is not Nebraska payroll.
Do not type the annual benefit into the salary box of the Nebraska paycheck calculator. The tool will treat it as wages, withhold FICA, and withhold Nebraska income tax. All three of those steps are the wrong model of a benefit. The tool is for pay an employer reports as wages.
A pension or a 401(k) distribution can be withheld under different rules, and a traditional deferral while you are working is a third subject. How a deferral changes a wage check is how a 401(k) changes Nebraska take-home pay. Do not use the benefit exemption to predict the tax on an IRA withdrawal.
Wages are still subject to federal income tax withholding, FICA, and Nebraska income tax withholding. The benefit does not get added to the gross on the stub, and it does not get a Nebraska allowance of its own. Your W-4 and W-4N describe the job. They do not describe the SSA-1099.
If the job is hourly, the hourly paycheck calculator estimates that job. If you want only the Nebraska line on the wages, use Nebraska tax withholding. None of those tools reduce the wage tax because a benefit is also arriving. The exemption is applied on the return, to the benefit, not as a discount on the W-2.
People under full retirement age can also run into the Social Security earnings test, which can hold back benefits when wages are over a yearly limit. That limit changes, and it is a federal Social Security rule about the benefit payment. It is not a Nebraska income-tax rate, and this page does not print a dollar limit that is revised on its own calendar. A smaller benefit because of the earnings test is still a benefit. Nebraska is still not taxing it.
A worker who collects benefits and also has a Nebraska job will see Nebraska tax on the stub and no Nebraska tax on the benefit. Adding the stub's Nebraska withholding to "tax on my Social Security" overstates the state. The withholding is on the wages. The W-2 state wages should reflect the job. The SSA-1099 reflects the benefit. Form 1040N is where the subtraction happens.
Federal tax is the side that can surprise people. The $2,000 in the example above is included in federal income even though Nebraska removes it. If no employer is withholding enough federal tax to cover that inclusion, the balance shows up on the federal return. That balance is not a Nebraska assessment. Estimated federal payments are one way people cover it when they no longer have a paycheck large enough to do the withholding.
A spouse's benefit follows the same Nebraska rule: it is a Social Security benefit, so it is exempt from Nebraska income tax. The federal combined-income test looks at the joint return if you file jointly. Two benefits and two jobs can push combined income over $32,000 or $44,000 without either person noticing on a single stub. The stubs were never the worksheet.
Iowa also subtracts Social Security benefits that were included in federal income, so a Council Bluffs retiree is not paying Iowa income tax on the benefit either. That similarity does not make the wage rules the same. A paycheck earned in one state and a home in the other is Nebraska vs Iowa paycheck. The benefit exemption is not a reciprocity agreement, and it does not stop the work state from withholding on wages.
Railroad retirement and public pensions are not this page. Social Security benefits, the ones on an SSA-1099, are the income Nebraska has fully exempted since 2024. If your income is a pension from a former employer, read that form's instructions rather than this exemption.
Look at the SSA-1099 for the benefit paid and for any federal tax withheld from it. Look at the W-2 only if you also worked. On the W-2, Nebraska wages and Nebraska withholding describe the job. They should not include the benefit. If a payroll provider added the benefit to wages, that is a setup error, not the exemption working backwards.
On Form 1040N, the subtraction is what makes the state tax on the benefit zero. Keep the federal inclusion and the Nebraska subtraction as two lines in your notes so a preparer, or you, does not "fix" the Nebraska return by putting the federal number back in. The Nebraska state tax rate guide is about rates on income the state does tax. It is the wrong page for a benefit the state has taken off the table.
No. Social Security benefits are fully exempt from Nebraska income tax, and that exemption has applied starting in 2024. Federal income tax can still apply to part of the benefits.
No. The 6.2% is FICA withheld from wages, up to the wage base. It is not a tax on the benefit check. Nebraska does not add a second tax on top of employee FICA.
A benefit paid by Social Security is not a wage from your employer. It is not a line on the paycheck. Wages you earn while collecting benefits are still withheld in the ordinary way.
No. The calculator estimates withholding on wages. Do not type a Social Security benefit into the salary field. That would treat the benefit as if it were a paycheck.