You generally have to file a Nebraska state income tax return if you were a full-year or part-year resident of Nebraska and you had to file a federal return or you had $5,000 or more of Nebraska adjustments to your federal adjusted gross income including state and local bond interest outside Nebraska that was exempt from federal tax. You also have to file a Nebraska return if you were not a resident but you had income from Nebraska sources. You can file your federal and Nebraska returns at the same time electronically, file just your Nebraska return electronically for free, or you can file a paper return using Nebraska Form 1040N or the simpler Form 1040NS if you filed federal form 1040EZ.
Your Nebraska state income tax return is based on your federal tax return, so you will need to complete your federal return first. If you are using tax software you may be able to prepare both returns simultaneously. On your Nebraska return you start with your federal adjusted gross income. You subtract either your Nebraska standard deduction or your itemized deductions to determine your Nebraska income before adjustments. If you itemized deductions on your federal return you have to subtract the deduction you claimed for Nebraska state income tax. Then you add and subtract certain items that are treated differently in Nebraska to arrive at your Nebraska taxable income.
Based on your taxable income and your filing status you find your tax in the tax table, or use the tax rate schedule. You subtract the personal exemption credit and any other credits to determine your tax liability. Then you subtract the Nebraska state income tax that was withheld from your pay and any estimated payments you made during the year. You can add any voluntary contributions you want to make. The end result is your refund or the amount you owe.
Nebraska Adjustments
Nebraska adjustments to your federal adjusted gross income are reported on Schedule I. Interest income on state and local bonds outside Nebraska that is exempt on your federal return is taxable on your Nebraska return. Interest and dividend income on Nebraska state and local bonds is exempt. Interest you earn on U.S. government obligations such as savings bonds or Treasury bills that you included on your federal return is also exempt in Nebraska.
If you included a Nebraska state income tax refund as income on your federal tax return because you had claimed an itemized deduction for the tax the prior year, you can subtract this refund on your Nebraska tax return.
If you had to include any railroad retirement benefits as taxable income on your federal return, you can subtract that income on your Nebraska return.
If you had a capital gain or received an extraordinary dividend on stock in a Nebraska corporation that you received due to employment or while you were employed by the company, you can exclude that income on your Nebraska return. A survivor of the employee could also qualify. To claim this deduction you need to complete Nebraska Schedule 4797N.
If you contributed to a Nebraska 529 college savings plan you can deduct up to $5,000 or $2,500 if you are married filing separately.
If you contributed to a Nebraska long-term care savings plan you can deduct up to $1,000 or $2,000 if married filing jointly. The earnings on the plan can also be deducted if they were included as income on your federal return.
If you are a nonresident and received compensation for active duty in the U.S. Military that was included on your federal tax return you can deduct that income on your Nebraska return. If you are a Nebraska resident, your active duty military pay is taxable in Nebraska.
If you are a Native American residing on a reservation and you have income from sources within the reservation, you can deduct that income on your Nebraska tax return.
Credits
If you paid personal income tax to another state, political subdivision or the District of Columbia you can claim a credit for that tax on your Nebraska return. You need to complete Schedule II if you are a Nebraska resident or Schedule III if you are a part-year resident. You also need to attach a copy of the tax return you filed with the other state. Nebraska does not allow a credit for income taxes paid to a foreign country.
If you claimed the credit for the elderly or disabled on your federal tax return you can claim the same credit on your Nebraska return. You need to attach to your Nebraska return a copy of federal Schedule R if you filed Form 1040 or federal Schedule 3 if you filed Form 1040A.
If you made contributions to community betterment organization projects you can claim the Community Development Assistance Act Credit. The organization must be recognized by the Nebraska Department of Economic Development. To claim the credit you must file Form CDN.
If you have a business and you expand your investment or employment in Nebraska you may be able to claim a credit on Form 3800N. The credit also includes investments in research and development, renewable energy, and rural development. Depending on the credit you are claiming, you will also need to complete the applicable worksheet for Form 3800N.
If you are a Nebraska resident and your adjusted gross income is more than $29,000 you can claim the nonrefundable child and dependent care credit. The credit you can claim on your Nebraska return is 25% of the credit you claim on your federal return. You cannot claim the credit if you are married filing separately. If your adjusted gross income is $29,000 or less you can claim a refundable credit for a higher percentage of the child and dependent care credit you claimed on your federal return. The percentage depends on your level of income. There is a worksheet in the Nebraska Individual Income Tax Booklet that helps you calculate the credit.
If you make a gift to a Nebraska charitable endowment you can claim a credit of 15% of the gift, up to a maximum credit of $5,000 or $10,000 if you are married filing jointly.
You can claim the Beginning Farmer Credit if you received a Statement of Nebraska Tax Credit, Form 1099 BFC, from the Nebraska Department of Agriculture. This is an incentive for Nebraska farmers and ranchers to rent to beginning farmers and ranchers to help them get started in production agriculture. You can find more information and application forms on the Nebraska Department of Agriculture website.
If you claimed the earned income credit on your federal tax return, you can claim a credit for 10% of that amount on your Nebraska tax return.
Sources:
Nebraska Individual Income Tax Booklet – Nebraska Department of Revenue
Reference:
- Current Year Tax Forms – Official Nebraska Government Website: www.revenue.state.ne.us/tax/current/current.htm
- E-Filing – Official Nebraska Government Website: www.revenue.state.ne.us/electron/e-file.htm
- Frequently Asked Questions – Nebraska Department of Revenue: www.revenue.state.ne.us/question/indiv_quest.htm
