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August 3, 2023
2023-1362

Nebraska law gradually lowers personal income tax rates over four years, starting in 2024

Nebraska Governor Jim Pillen signed into law LB 754, which gradually reduces the state's top personal income tax rates and collapses the tax brackets from four to three over four years, starting in 2024.

Under LB 754, the top individual income tax rate is lowered from 6.84% to 5.84% for tax year 2024, 5.2% for 2025, 4.55% for 2026 and 3.99% for 2027 and subsequent years.

LB 754 adds to the personal income tax cuts enacted in 2022 under LB 873, which would have lowered the top income tax rate to 5.84% by 2027. (See Tax Alert 2022-0614.)

LB 754 tax rates and bracket structure starting in 2024

Tax year beginning on/after

Bracket one rate

Bracket two rate

Bracket three rate

Bracket four rate

January 1, 2024

2.46%

3.51%

5.01%

5.84%

January 1, 2025

2.46%

3.51%

5.01%

5.20%

January 1, 2026

2.46%

3.51%

4.55%

Bracket eliminated

January 1, 2027

2.46%

3.51%

3.99%

Bracket eliminated

Supplemental wages

Currently, the supplemental rate of withholding on bonuses and irregular wage payments is 5%. In light of the reduced tax rates for brackets three and four, it is likely the supplemental rate of withholding will be reduced starting in 2026. (2022 Nebraska Circular EN, p.9.)

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (kristie.lowery@ey.com)
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

 

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