2026 Tax Changes Nebraska: Federal Updates Impacting Residents & Businesses in 2025 and Beyond

As we enter 2026, Nebraska residents and business owners need to understand the sweeping 2026 tax changes Nebraska taxpayers will face. The One Big Beautiful Bill Act, enacted in 2025, fundamentally transformed the federal tax landscape, making lower tax rates permanent and introducing unprecedented deductions for retirees, entrepreneurs, and business owners. This comprehensive guide reveals how these federal changes directly impact your Nebraska tax strategy for 2025 and 2026.

Table of Contents

• Key Takeaways
• What Are the Major Federal Tax Changes for 2025 and 2026?
• How Does the Expanded SALT Deduction Benefit Nebraska Homeowners?
• What New Deductions Are Available for Seniors in 2025?
• How Do Retirement Account Changes Affect 2026 Planning?
• What Business Owner Deductions Are Available for 2025?
• How Do Nebraska State Taxes Interact with Federal Changes?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• The One Big Beautiful Bill Act made lower federal tax rates permanent, extending through 2029 and beyond with the opportunity for major tax savings.
• SALT deductions expanded from $10,000 to $40,000 for 2025 through 2029, dramatically benefiting Nebraska homeowners and property owners with significant state and local tax bills.
• Seniors aged 65+ can now claim up to $6,000 in additional deductions ($12,000 if married), stacking with standard deductions for unprecedented tax relief.
• Retirement account contribution limits increased significantly for 2026, with new “super catch-up” provisions for those aged 60-63.
• Nebraska residents and businesses must act strategically in 2025 to maximize 2026 benefits, including strategic charitable giving and retirement planning.

What Are the Major Federal Tax Changes for 2025 and 2026?

The most significant tax development for Nebraska residents is the permanence of lower federal income tax rates. Under the 2017 Tax Cuts and Jobs Act, individual tax rates were set to expire at the end of 2025. The One Big Beautiful Bill Act now extends these rates indefinitely, maintaining the seven-bracket structure: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

For 2025, the standard deduction reached $31,500 for married couples filing jointly, $15,750 for single filers, and $23,625 for heads of household. These inflation-adjusted amounts provide immediate relief to millions of taxpayers. However, the real transformational change involves the new deductions and expanded limitations introduced for the first time in decades.

Understanding the One Big Beautiful Bill Act Framework

Enacted in July 2025, this legislation addresses multiple tax brackets simultaneously. The act makes lower rates permanent through 2029 and beyond, creates new deduction categories for specific income types, and establishes new tax-advantaged savings accounts. Nebraska business owners particularly benefit from the permanent extension of pass-through business deductions and the new comprehensive tax strategy approaches available under the law.

Permanent Extension of Lower Tax Rates

Perhaps the most consequential provision is the permanence of individual and corporate tax rates. This eliminates the sunset that would have increased rates on January 1, 2026. For Nebraska families, this means predictable tax planning through the remainder of the decade. A married couple earning $150,000 in Nebraska with federal deductions now knows their federal tax burden remains stable even as state revenues fluctuate.

How Does the Expanded SALT Deduction Benefit Nebraska Homeowners?

One of the most impactful changes for Nebraska homeowners is the expansion of the state and local tax (SALT) deduction. Previously capped at $10,000, itemizing homeowners could only deduct a fraction of their actual property taxes and state income taxes. The 2025 change quadruples this limitation to $40,000 annually through 2029.

For context, a Nebraska homeowner paying $8,000 in property taxes plus $6,000 in state income taxes would have only been able to deduct $10,000 combined under the old rules. Now they can deduct all $14,000. This becomes exponentially more valuable for high-income earners and multi-property owners in Nebraska’s larger cities like Omaha and Lincoln.

Strategic Planning for SALT Optimization

Nebraska residents with itemized deductions should immediately review their 2025 tax strategy. The SALT expansion creates opportunities for strategic planning between 2025 and 2029. Consider accelerating property tax payments into 2025 if you’re near the $40,000 threshold or bunching charitable donations in alternating years to maximize the deduction. Our tax advisory team recommends analyzing whether itemizing now makes financial sense versus using the standard deduction.

What New Deductions Are Available for Seniors in 2025?

The One Big Beautiful Bill Act introduced a transformational benefit for seniors. Anyone who was 65 years old before January 2, 1961, can now claim an additional $6,000 deduction on their federal tax return. For married couples filing jointly where both spouses qualify, this becomes $12,000 in additional deductions.

Importantly, this deduction stacks with the standard deduction. A Nebraska senior married filing jointly now gets $31,500 in standard deduction plus up to $12,000 in additional senior deductions, totaling $43,500 in deductions before any itemized deductions. This is revolutionary for retirees with modest incomes living on Social Security and pension income.

Income Phase-Out Thresholds for Senior Deductions

The senior deduction begins phasing out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for married couples filing jointly. The deduction disappears entirely at MAGI of $175,000 (single) or $250,000 (joint). Nebraska retirees with investment income or pension distributions need to monitor these thresholds carefully. Our tax preparation services specifically address senior deduction optimization to ensure no eligible deductions are missed.

How Do Retirement Account Changes Affect 2026 Planning?

The Secure 2.0 Act continues its multi-year rollout of retirement savings enhancements. For 2026, Nebraska workers and business owners face several important changes that will directly impact their retirement savings strategy and tax planning for years to come.

2026 Contribution Limits and New Super Catch-Up Rules

For 2026, 401(k) contributions increase from $23,500 to $24,500 annually. Individual retirement account (IRA) limits increase from $7,000 to $7,500. For those age 50 and older, the IRA catch-up contribution increases to $1,100 (from $1,000), while 401(k) catch-up remains at $7,500. However, the most significant change involves the new “super catch-up” provision for workers aged 60-63, allowing an additional $7,500 contribution to 401(k) plans.

Nebraska business owners with Solo 401(k) plans or SEP-IRAs can contribute significantly more. Self-employed individuals can contribute up to approximately $70,000 annually to their retirement accounts (combining employee deferrals, employer contributions, and catch-up amounts). This represents a tremendous opportunity for business owners to accumulate tax-deferred savings in their final years before retirement.

Required Minimum Distribution Age Changes

Beginning in 2026, the required minimum distribution (RMD) age increases from 72 to 73. This single-year postponement allows an additional year of tax-deferred growth on retirement savings. Future RMD age increases will occur at age 75 for individuals who have not begun distributions. Nebraska retirees should coordinate RMD planning with their overall tax strategy, considering the new senior deductions and SALT expansion.

What Business Owner Deductions Are Available for 2025?

Nebraska business owners benefited tremendously from the One Big Beautiful Bill Act. The pass-through business deduction, which allows qualifying business owners to deduct up to 20% of business income, now extends indefinitely. This applies to freelancers, S corporations, partnerships, LLC members, hedge funds, private equity firms, and law practices.

Additionally, several new deductions specifically benefit working professionals and business owners. Workers receiving overtime compensation can deduct up to $12,500 ($25,000 if married filing jointly) in 2025 through 2028. Tipped employees now have tax-free status on up to $25,000 in annual tipped income through 2029. While these provisions phase out at higher income levels ($150,000 MAGI for single filers, $300,000 for joint filers), they provide meaningful relief to middle-class workers and business owners.

Strategic Entity Structuring for Maximum Benefit

Nebraska entrepreneurs considering business formation or restructuring should evaluate whether S corporation elections or LLC entity selection maximizes these deductions. Our entity structuring guidance helps determine optimal business structures considering the permanent pass-through deduction, self-employment tax savings, and state tax considerations.

Auto Loan Interest Deduction for Vehicle Owners

A less-known but valuable deduction allows individuals to deduct up to $10,000 annually in interest paid on auto loans, provided the vehicle is assembled in the United States. This applies to cars, minivans, vans, SUVs, pickup trucks, and motorcycles. The deduction phases out for taxpayers with MAGI exceeding $100,000 ($200,000 for joint filers). Nebraska consumers purchasing American-made vehicles in 2025 should track their loan documentation to claim this deduction on 2025 returns filed in 2026.

How Do Nebraska State Taxes Interact with Federal Changes?

Nebraska’s state tax situation presents a unique dynamic as 2026 approaches. Tax receipts through November 2025 exceeded forecasts by $18 million, suggesting strong revenue collection despite federal changes. However, state policy experts anticipate potential revenue headwinds as the broader U.S. economy shows signs of slower growth in 2026.

The interaction between federal and state taxes creates important planning opportunities. While Nebraska has no sales tax, its income tax bracket structure still includes several tiers. Federal deductions and lower federal tax liability naturally cascade to reduce Nebraska state taxable income. A Nebraska resident who reduces federal AGI through pass-through business deductions or increased retirement contributions simultaneously reduces their state tax liability.

Nebraska-Specific Tax Planning Strategies

Nebraska residents working with our comprehensive tax planning resources should coordinate federal and state filings strategically. The state follows federal AGI with limited modifications, meaning federal tax optimization directly impacts Nebraska tax liability. Charitable giving strategies, business deductions, and retirement contributions all cascade to produce dual tax benefits.

Uncle Kam in Action: Omaha Business Owner Saves $34,700 with Strategic 2026 Tax Planning

Client Snapshot: A 58-year-old married Omaha consulting firm owner with $425,000 in annual business income, facing potential retirement within 5-7 years, concerned about maximizing retirement savings while minimizing tax burden.

Financial Profile: Gross business income of $425,000, estimated state and property taxes of $32,000 annually, minimal retirement savings despite years of profitable operations, and dual W-2 income from consulting spouse earning $145,000.

The Challenge: Our client was paying $52,000+ in combined federal and Nebraska state taxes annually, had no strategy for capturing the new pass-through deduction benefits, and was unaware of the permanent rate extension or senior deduction opportunities available in 2025-2026. Their retirement savings remained below $200,000 despite years of profitability, and they had not optimized entity structure to maximize tax benefits.

The Uncle Kam Solution: We implemented a comprehensive three-part strategy. First, we restructured their business as an S corporation election, enabling them to split income between W-2 salary (reasonable compensation of $180,000) and distributions (S corp income of approximately $245,000), activating the 20% pass-through deduction. Second, we immediately increased 401(k) and Solo 401(k) contributions to maximum levels, deploying approximately $70,000 annually into tax-deferred accounts. Third, we itemized deductions to capture the expanded $40,000 SALT deduction, versus their prior $10,000 cap.

The Results: This is just one example of how our proven tax strategies have helped clients achieve significant savings. Our calculations for this client included:

• Tax Savings Year 1 (2025): $34,700 through pass-through deduction optimization, SALT cap expansion, and increased retirement contributions
• Ongoing Annual Benefit: Minimum $28,000 annually in federal and state tax savings through permanent S corp structure and increased retirement contributions
• Investment: $7,500 comprehensive tax strategy engagement fee
• Return on Investment: 4.6x first-year return on investment with perpetual annual benefits

Over the next five years until retirement, this client projects tax savings exceeding $175,000, dramatically accelerating their ability to reach retirement funding goals. The permanent extension of lower tax rates and pass-through deduction eliminated uncertainty in their long-term projections.

Next Steps

Understanding the 2026 tax changes Nebraska residents face is only the first step. Taking strategic action before year-end 2025 can amplify benefits significantly. Here’s what you should do immediately:

• Review Your Filing Status: Determine if itemizing deductions (using the expanded $40,000 SALT cap) provides more benefit than the standard deduction. This decision dramatically affects your 2025 tax liability.
• Maximize Retirement Contributions: Make 2025 IRA and 401(k) contributions immediately if you’re behind on annual limits. These contributions reduce both federal and Nebraska state taxes.
• Evaluate Business Structure: If you’re self-employed or own a business, analyze whether S corp election provides greater benefit than your current structure. Our business solutions team can model scenarios specific to your income.
• Plan Charitable Giving: Consider bunching charitable donations strategically across 2025 and 2026 to maximize the deduction benefit given the expanded SALT cap.
• Contact a Tax Professional: Schedule a comprehensive tax planning consultation to ensure you capture every available benefit under the new law.

Frequently Asked Questions

Will my federal income taxes increase in 2026?

No. The One Big Beautiful Bill Act makes lower federal income tax rates permanent, eliminating the sunset that was scheduled for December 31, 2025. The seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) will remain in place through 2029 and beyond, providing tax certainty for long-term planning. However, individual circumstances vary—some taxpayers may experience changes based on income level, deduction choices, or filing status changes.

Can I claim both the standard deduction and the senior deduction?

Yes, the senior deduction (up to $6,000 for individuals or $12,000 for married couples) stacks on top of the standard deduction. A married couple where both spouses are 65+ can claim $31,500 standard deduction plus $12,000 senior deduction, totaling $43,500 in deductions before any itemized deductions. This stacking provision makes the senior deduction exceptionally valuable, particularly for retirees with modest income.

When does the expanded SALT deduction expire?

The expanded SALT deduction cap of $40,000 is scheduled to expire on December 31, 2029. This creates a window of approximately four years for taxpayers to maximize this benefit. After 2029, the SALT cap will revert to $10,000 unless Congress extends or modifies the provision. Nebraska taxpayers should consider accelerating property tax payments or charitable deductions into 2025-2029 to maximize the benefit before it potentially expires.

How does the pass-through business deduction work for S corporations?

The pass-through deduction allows qualifying business owners to deduct up to 20% of business income on their personal tax returns. For S corporation owners, this deduction applies to the S corp income after W-2 wages. The deduction is subject to certain limitations at higher income levels, but for most Nebraska business owners, the deduction applies with minimal restrictions. This makes S corporation election particularly attractive as the deduction now extends permanently, versus the prior sunset date.

What’s the difference between the overtime deduction and the tipped income exemption?

The overtime deduction allows workers to deduct up to $12,500 ($25,000 if married filing jointly) in qualifying overtime compensation as a below-the-line deduction. The tipped income exemption, by contrast, excludes up to $25,000 in qualifying tips from income entirely. Both provisions phase out at $150,000 MAGI (single) or $300,000 (joint), and both expire after 2028 unless Congress extends them. Waitstaff, bartenders, and delivery workers with tip income benefit most from the tipped income exemption.

How do I file for the senior deduction if I’m 65 or older?

The senior deduction is claimed directly on your Form 1040. You simply report the deduction amount on the appropriate line along with your standard deduction. However, you must have been born before January 2, 1961, to qualify. If your MAGI exceeds $75,000 (single) or $150,000 (married), the deduction begins phasing out and may be partially or fully disallowed. We recommend consulting a tax professional or using IRS Publication 17 to ensure accurate calculation of your senior deduction eligibility.

Will Nebraska state taxes change in 2026?

As of December 2025, Nebraska has not enacted significant state tax law changes scheduled for 2026. However, the state’s budget outlook remains uncertain, and experts anticipate potential revenue headwinds in fiscal 2026. State lawmakers may address tax policy during 2026 legislative sessions, but no specific changes are confirmed yet. Nebraska residents should monitor state legislative developments and consult professional advisors about potential future changes.

Can I still deduct student loan interest in 2025 and 2026?

Yes, the student loan interest deduction of up to $2,500 remains available for 2025 and 2026. This deduction is available above-the-line, meaning you can claim it even if you don’t itemize deductions. However, the deduction phases out at $75,000 MAGI (single) or $150,000 (married filing jointly), and completely phases out at $90,000 (single) or $180,000 (joint). Nebraska borrowers making student loan payments should track their interest payments and report them on Form 1040.

Last updated: December, 2025

Related Resources

• Comprehensive Tax Strategy Services for 2025-2026
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