Wow! Nebraska is NOT at all favorable to retirees from a tax perspective. In fact, of all the states I’ve covered so far, Nebraska may be the worst. I need to revisit Connecticut before I state that unequivocally. But man, oh man, I had higher hopes for Nebraska than being in the running for worst states for retirees, that’s for sure.
How bad is it? You ask? Let’s count the ways!
1. Income taxes. First, Nebraska has a HUGE income tax rate of 6.84% for folks with taxable income over $60k, if you’re married. Single? it’s $30k,
Now, this is TAXABLE INCOME, so you’d need to add your Standard Deductions or any other deductions you have to the taxable income amount to get your GROSS INCOME. For instance, a married couple needs to have more than $86,600 in Gross Income before they are in the 6.84% tax bracket. But still, $86,600 of income doesn’t make you Warren Buffet by any stretch of the imagination.
2. Taxes on Social Security and retirement income – in Nebraska if you have GROSS INCOME over $58k(married) you’re going to pay tax on your Social Security benefits.
All other income is taxed at ordinary income rates too. Only exception is some insane military pension configuration. Good luck figuring that out!
3. Property tax – Among the highest in the nation from a percentage basis AND, even though the median property is only $133k, still among the highest in the nation from total dollars paid too!
Think about it like this: Massachusetts has a median property value 3x that of Nebraska. But the taxes in MA in actual dollar amount is only about 50% higher. That just shows you how high the Nebraska property percentage rate is.
Oh, you’re holding out for a homestead exemption are you? Yeah, good luck with that. If you’re married with gross income over $33k, you don’t qualify for the full exemption. If you’re income is $50 (married) you don’t get anything. Nice. Of course, if your home is worth more than $95 or 200% of the average for your county, you don’t get anything either.
4. Sales tax – 6.89% state and local average sales tax. Which puts Nebraska smack down in the middle of the US. Not high, but not low and factoring their other taxes, one would think they’d have a lower sales tax burden.
5. Inheritance tax – I will do another playlist set on states estate and inheritance tax, but I do need to point out here that Nebraska does have an inheritance tax.
Pass assets to your kids at your death, they pay 1% on the value they receive, after a $40k exemption. However, pass assets to your nephew/niece/uncle/aunt hey pay a 13% inheritance tax after a $15k exemption!
Pass assets to anyone else they pay a 18% inheritance tax after all of a $10k exemption.
Moral of the story: don’t die in Nebraska!