Nebraska income tax 2025: What you need to know
When discussing taxes, most people tend to focus on the federal income tax. But Nebraskans also pay income taxes to the state, and there are deductions and credits specific to the state income tax return.
If you pay a professional to prepare your taxes, they should be up to date on all this information, but it’s still good for you to be informed. And if you are doing it yourself – either through the state’s NebFile application or through a commercial software program – you definitely need to know what’s in this article.
In this article, I’ll introduce two new credits, discuss the update of a credit, and remind you of an existing credit.
In this article, I’ll discuss the following credits/deductions:
Child Care Tax Credit – Apply for this as soon as possible!
Opportunity Scholarships Act – New this year.
College Savings plan (529 plan) contributions – No changes this year.
Property Tax Credit – Changes made to the credit this year.
Note: If you prefer to get this information straight from the horse’s mouth, I suggest flipping through the 2024 income tax booklet, available online here.
Child Care Tax Credit
The state of Nebraska has created a tax credit for parents with kids in a childcare program. There is a limit to the number of credits they are giving, and you must apply for it to reserve your share, so it’s important to act quickly if you want to get the credit.
If you or a loved one has young kids in daycare, they need to know about this credit!
What you need to know, copied from the official FAQ:
The child must be under age 6 (born on or after 01/01/2019)
The child must be enrolled in a licensed or exempt child care program
The credit amount is based on the parent/guardian’s Adjusted Gross Income:
Under $75,000 – $2,000 per child
Between $75,000 - $150,000 - $1,000 per child
Over $150,000 – you are not eligible for the credit
Funds are limited – $15 million has been allocated to this credit. That’s only enough for 7,500 – 15,000 eligible children.
You must apply for the credit through a portal called Centurion.
I completed the application in about 10 minutes. It’s pretty straightforward once you create your account on the portal. Besides basic identifying information, you will also need:
You (and your spouse’s, if necessary) SSN
Your child(s) SSN
Your income for 2024. If you don’t yet have this information, they provide a worksheet so you can calculate it.
Identifying information on your child care provide (they give you a list of all programs in the state, from which you can pull the program’s ID number)
Note: This new credit is separate from, and in addition to, the Child/Dependent Care Nonrefundable credit.
Opportunity Scholarship Act
What you need to know: If you made an eligible donation in 2024, give your tax preparer your contribution receipt provided by Opportunity Scholarship of Nebraska.
The Opportunity Scholarship program allowed taxpayers to claim an income tax credit for donations made to scholarship programs at private schools in Nebraska. The fate of the program was on the ballot in November, and the majority of Nebraskans voted not to continue the program. However, if you made an eligible donation before October 31st, 2024, you are still able to claim your tax credit when you file your tax return.
You cannot claim an Opportunity Scholarship credit if you deducted the donation on your federal tax return.
If you made an eligible donation, you should have received a receipt from the OSN organization. The tax credit is equal to your contribution amount, limited to 50% of your state tax liability (i.e. your tax bill), and any unused credit can be used in the next five years. For example, if your OSN contribution was $5,000 and your state tax bill is $4,000, your maximum credit is $2,000 (50% of $4,000) and the unused $3,000 ($5,000 – $2,000) credit can be used next year or the four years after.
For more information, visit the OSN website.
Nebraska College Savings Program (AKA 529 plan)
What you need to know: If you made contributions to a 529 College Savings plan in 2024, you should tell your tax preparer the amount of contributions you made.
You can deduct from your income contributions made by you to an account you own, up to $10,000. The contributions must be made to a “NEST 529” plan, sponsored by the State of Nebraska.
NEST may not send you a neat little form with your contribution summary, so you will need to get that information from your 2024 year-end statement.
Read more: All about Nebraska 529 Plans
Property Tax Credit
What you need to know: You or your tax preparer will have to identify property that you own to claim a credit for taxes paid to your local community college. The income tax credit will be lower this year than in previous years, as most of the credit is being moved to your property tax statement. There is currently a bill in committee that would approve a credit for property taxes paid in 2024, and for that reason it may be a good idea to delay filing your state return until the bill is passed/rejected.
For each of the past four years, owners of land and houses (AKA real property) have been eligible for a credit on Nebraska income taxes, equal to a certain percentage of property taxes paid to public schools – and later, to community colleges. There is no longer an income tax credit for public school taxes (more on that below) but you will still need to claim the credit for taxes paid to community college and thus will need to complete Form PTC – or give your tax preparer the information to complete it.
What happened to the income tax credit?
The Property Tax Incentive Act, enacted in 2020, allowed taxpayers to claim an income tax credit against a portion of their property taxes paid to the local public school district. In other words, you would pay your property taxes in Year 1 and then claim a credit on your income tax return in Year 2. As you can imagine, a lack of knowledge led to less than half of eligible taxpayers claiming their credits.
A bill passed in 2024 has moved a portion of that credit (the public school portion) from your income taxes to your property tax statement. Rather than you having to claim the credit on your tax return in 2026, the state is giving you the credit directly on your property tax bill due in 2025 (see below).
In passing the bill last year, senators inadvertently removed the credit for property taxes assessed December 2023 but paid in 2024 (which applies to 85% of Nebraska property owners). There is currently a bill in committee to make up for the missing year, but there’s no guarantee it will pass into law.
Read more about the pending bill in the Nebraska Examiner.
If you noticed your property tax bill in December 2024 (which most people pay in 2025) was lower than the previous year, you’re not alone. When I received my statement last month, I thought maybe one of the levies had decreased. But while researching this article, I took another look at my statement and, sure enough, there is a new line for School Tax Credit.
Personally, I’m glad that they moved the credit from income taxes to the property tax statement. Selfishly, it lets me keep more of my own money. And, unselfishly, it gives a benefit to the people who deserved it but did not know they had to claim a credit on their income tax.
About the Author
Joseph Fowler, CFP® is a financial planner and co-owner of 402 Financial in Lincoln, NE.
402 Financial provides financial planning and investment management services to people approaching or in retirement. Joe always acts as a fiduciary and never takes commissions on product sales.
Click this link to schedule a free consultation with Joe.
