Moving to Nebraska

Nebraska taxes a resident on everything and a nonresident on Nebraska-source income only, and the year you move you are both. You are a resident if Nebraska is your domicile, the place you intend as your permanent home, or if you keep a permanent place of abode in the state and are physically present here more than six months in the year, with any part of a day counting as a day. A part-year resident is someone who changed domicile during the year, in or out. Both part-year residents and nonresidents file the same Form 1040N everyone else files and attach Schedule III, which computes the tax as if all income were Nebraska’s and then keeps the Nebraska share. Nebraska has no reciprocal agreement with any state, so a person who lives on one side of the line and works on the other files two returns and takes a credit at home. And since 2025 a nonresident who works from home for a Nebraska employer owes Nebraska nothing on that pay unless he was physically in Nebraska more than seven days in the year.

The Department of Revenue’s residency guide puts the domicile test in terms a court would use: physical presence in the new place, intent to make it home, and abandonment of the old one. It then lists what it looks at when a move is questioned: where you bought or lease a home, where you are registered to vote, where your driver’s license and vehicles are registered, where you spend your days, where your family, property and professional relationships are, and where your children go to school. No single item decides it.

Three kinds of filer

The 183-day test does not apply to servicemembers or their spouses, who keep their home state’s residency while stationed in Nebraska under orders. Interest, dividends and pension payments received while a nonresident are not Nebraska-source income; received while a resident, they are.

How Schedule III works

Form 1040N is completed on all income: federal AGI on line 5, the Schedule I adjustments, the full Nebraska standard deduction or itemized deductions, and the tax from the Tax Calculation Schedule on the whole taxable income. Then Schedule III does three things. Line 1 is total income from Nebraska sources, line 2 the adjustments tied to that income, and line 3 the Nebraska AGI. Line 4 is the ratio of Nebraska AGI to total AGI, carried to five decimals. The tax on all income, less the $176 personal exemption credits and, for part-year residents, the elderly and dependent care credits, is then multiplied by the ratio, and that is the Nebraska tax, carried to line 15 of the 1040N. The Nebraska earned income credit, 10% of the federal, is multiplied by the same ratio.

The effect is that a part-year resident pays Nebraska’s graduated rates as if the whole year’s income had been earned here, then keeps the Nebraska fraction. Nebraska-source income for the Nebraska part of the year includes everything received while a resident: wages wherever earned, interest, dividends, pension and IRA payments received during the residency period, and gains on sales closed during it.

Credit for tax paid to another state

A full-year resident who earns income taxed by another state, a commuter, a landlord with a rental across the line, a partner in an out-of-state business, reports the income to Nebraska and claims a credit on Schedule II. The credit is the least of three numbers: the Nebraska tax, the Nebraska tax multiplied by the share of AGI that came from the other state, and the tax actually due and paid to the other state, not the amount withheld. One Schedule II per state, with a complete copy of the other state’s return attached. The credit is for income tax paid to another state, not for foreign taxes, and it is for full-year residents only; a part-year resident gets the equivalent relief through the Schedule III ratio instead. Because the credit cannot exceed the Nebraska tax on the same income, a resident who works where the rate is higher pays nothing more to Nebraska on those wages; one who works where it is lower pays the difference to Nebraska.

No reciprocity, and the commuter’s two returns

Nebraska has no reciprocal wage agreement with any of its neighbors. A resident of Nebraska who works in Iowa, Kansas, South Dakota, Colorado, Wyoming or Missouri files a nonresident return in the work state (where it has an income tax) and a resident return in Nebraska with Schedule II. A resident of one of those states who works in Nebraska files a Nebraska nonresident return with Schedule III on the Nebraska wages and claims whatever credit the home state gives. The Nebraska employer withholds Nebraska tax from the nonresident’s wages on Form W-4N, and there is no home-state form that stops it.

Remote work: the seven-day rule

Nebraska has a convenience-of-the-employer rule: a nonresident who works for a Nebraska employer from a home office in another state, when the work could have been done in Nebraska, has historically owed Nebraska tax on the pay as if it had been earned here. A 2024 law narrowed it for tax years beginning in 2025. Under Neb. Rev. Stat. 77-2733(8)(c), a nonresident’s pay for work done outside Nebraska for a Nebraska employer is Nebraska-source only if the work could have been performed in Nebraska and the employee was physically present in Nebraska for more than seven days during the year. Days actually worked in Nebraska are Nebraska-source regardless. And a nonresident who is in Nebraska seven or fewer days, works in more than one state, and earns $5,000 or less in Nebraska owes no Nebraska tax at all on it.

Two people illustrate it. An employee of an Omaha company who lives across the river, works from home, and comes to the office five days in 2026 for meetings owes Nebraska tax on five days’ pay, nothing more. The same employee who comes in twenty days owes Nebraska tax on the whole year’s pay, because the seven-day door has opened and the convenience rule applies to every day worked at home. Employers are protected from withholding penalties if they rely on a time-and-attendance system or other reasonable records, so the count is likely to be the employer’s count. Anyone near it should keep a calendar.

Moving in: the wage exclusion for new residents

A person who moves to Nebraska and takes a job here paying between $70,000 and $250,000 may make a one-time election to exclude the wages from Nebraska income for the year under the Relocation Incentive Act, on Schedule I line 45, entering the date of the move (verify). It is a one-year exclusion, available once in a lifetime, and it is recaptured on Schedule I line 10 if the new resident leaves Nebraska within two years. The Department’s instructions carry the conditions, and a new arrival in the wage range should ask about it before filing the first Nebraska return; the federal return knows nothing of it.

Two other things change when Nebraska becomes home. Retirement income becomes Nebraska’s to tax: a pension or IRA payment received after the move is Nebraska income, whatever state the pension was earned in, and Nebraska taxes it in full unless it is Social Security, military or civil service retirement; see Nebraska for retirees. And Nebraska has a county inheritance tax on property passing from a Nebraska resident at death, with rates of 1% to 15% depending on the heir’s relationship, so a new resident’s estate plan may need a look.

Moving out: what Nebraska will ask

The person leaving Nebraska has the harder job, because Nebraska has the incentive to say the move never happened. The guide’s list of domicile factors is the checklist: new driver’s license, new voter registration, vehicles re-registered, the Nebraska homestead exemption surrendered, the new address on federal returns and financial accounts, and, where a Nebraska home is kept, a record of days that shows fewer than 183 in Nebraska. A Nebraska home kept as a second home is the usual problem; with more than six months of presence it makes the owner a resident again regardless of domicile. Income received after the move is not Nebraska’s unless it is Nebraska-source: Nebraska wages, rental income, real estate gains and pass-through income from a Nebraska business are reported on a nonresident Schedule III for as long as they last.

Servicemembers and spouses

A Nebraska resident who enters the service stays a Nebraska resident wherever stationed, files Form 1040N on all income including military pay, and takes a Schedule II credit for any tax the duty state imposes. A servicemember from another state stationed in Nebraska is a nonresident; the military pay is subtracted on Schedule I line 27 and only Nebraska-source income such as a spouse’s Nebraska business income is taxed. A spouse may elect the servicemember’s state of residence for tax purposes, and a spouse working for a Nebraska employer on W-2 wages gives the employer Form 9N to stop Nebraska withholding.

The year you move: a checklist

• Fix the date. The day domicile changed is the day Schedule III splits the year; a lease, a closing or a start date usually proves it.
• Split every income item by period: wages by pay date, interest and dividends by the period earned, pension and IRA payments by the date received, gains by the date of sale.
• Get a Form W-4N to the new Nebraska employer on day one, so the withholding starts with the Nebraska wages and not three months later.
• If you moved in and earn $70,000 to $250,000, ask about the Relocation Incentive Act election before filing.
• If you moved out and kept the Nebraska house, start the day count and keep it.
• Expect two part-year returns for the move year, one in each state, with neither taxing the other’s period.
• If you are 65 or older before January 1 and own your new Nebraska home, the homestead exemption window at the county assessor is February 2 to June 30.
• Estimated payments: Nebraska expects them when the tax after withholding will be $500 or more, and a mid-year arrival with unwithheld income can be caught.