Social Security income tax partial phaseout approved

Lawmakers passed a bill May 20 to reduce taxation of Social Security income in Nebraska over several years with the intention of eliminating it entirely.

LB64, sponsored by Omaha Sen. Brett Lindstrom, sets the exemption on such income, to the extent that it is included in federal adjusted gross income, at 5 percent in tax year 2021. The exemption will increase to 20 percent in 2022 and then rise 10 percent per year until reaching 50 percent in tax year 2025.

The bill states legislative intent to continue incremental reduction of the tax — reaching 100 percent exemption in tax year 2030 — but passage of new legislation will be required to complete the process.

LB64 is estimated to reduce general fund revenue by $15 million in fiscal year 2021-22 and $73.8 million in FY2025-26.

Lawmakers voted 41-0 to pass LB64.