LUTZ BUSINESS INSIGHTS
nebraska income tax Update + lb873
russ smith, tax & consulting director
Nebraska Governor Pete Ricketts signed Legislative Bill 873 on 4/13/22. The bill intends to lower state income tax rates, phase out income tax for Social Security, and add refundable property tax credits for real estate tax paid to K-12 schools and community colleges.
INDIVIDUAL INCOME TAX
Reduces the top individual income tax rate gradually from 2023 through 2027 from the current 6.84% to 5.84%. The top rate kicks in at income over $29,000 (single and married filing separate), $58,000 (married filing joint), $43,000 (head of household), and $15,150 (estates and trusts). The first-rate reduction to 6.64% will begin in tax year 2023.
CORPORATE INCOME TAX
Continues the phased-in reduction of the top corporate income tax rate. Cuts rate from current 7.5% to 5.84% by 2027. The top rate applies to income over $100,000. The top tax rate for 2022 will be 7.25%.
SOCIAL SECURITY INCOME TAX
Accelerates the phased-in exemption of all Social Security income by tax year 2025. The exemption will be 40% for 2022, 60% for 2023, 80% for 2024, and 100% for 2025 and future years.
PROPERTY TAX CREDIT
Ensures the Property Tax Credit does not fall below its current amount of $548 million, increasing the credit to $560.7 million for tax year 2023, with an allowable growth percentage of up to 5% beginning in tax year 2024. The Property Tax Credit is the refundable income tax credit for real estate tax paid to K-12 schools. The 2021 Property Tax Credit percentage is 25.3%. Future credit will be determined by the Department of Revenue, but it is expected that the credit rate will be about the same for 2022, with slight increases in future years.
COMMUNITY COLLEGE PROPERTY TAX CREDIT
Creates a Property Tax Credit for real estate taxes paid to a community college. $50 million of credits will be available for 2022, with annual increases to $195 million by 2026. After 2026, the annual amount will increase by the allowable growth percentage. The community college Property Tax Credit will be a refundable income tax credit, similar to the K-12 Property Tax Credit.
ABOUT THE AUTHOR
RUSS SMITH + TAX & CONSULTING DIRECTOR
Russ Smith is a Tax & Consulting Director at Lutz with over 20 years of state tax experience. He specializes in state income tax planning and compliance and helps clients minimize state and local taxes through the use of incentives.
AREAS OF FOCUS
- Tax Planning & Compliance
- State and Local Tax (SALT)
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- BSBA, University of Nebraska, Kearney, NE
- Graduate Studies, University of Nebraska, Lincoln, NE
- Douglas County Historical Society, Board Member
- Douglas County Historical Society Foundation, Board Member
- Nebraska Income Tax Update + LB873
- Iowa Income Tax Update + HF2317
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- Nebraska Microenterprise Tax Credit
- ImagiNE Nebraska Act (LB1107)
- Will a Nebraska 529 College Savings Plan Reduce Your Tax Obligations?
- Income Tax Nexus May Affect Your Business; Here's How
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