LB 303 would phase out state income taxes on Social Security benefit

LINCOLN, Neb. — State Senator Jeremy Nordquist introduced legislation on Thursday that would gradually phase out state income taxes levied on Nebraskans’ Social Security benefits.

“As the Governor presents his budget to the Legislature today, it is important to keep in mind that many of Nebraska’s seniors are struggling to make ends meet. And by taking a cut of their Social Security checks, state government isn’t making things any easier for them,” Nordquist said. “We shouldn’t be leveling taxes on Nebraskans who have landed in — and who rely on — the federal safety net.”

Under LB 303, Nebraskans receiving Social Security benefits would be able to exempt up to $15,000 of their income when filing their state tax returns for 2009. That exemption, which is doubled for couples filing jointly, would increase steadily to $75,000 in 2013 — effectively ending state taxation of Social Security benefits.

Iowa and Missouri have recently passed similar plans. Missouri’s phase out will be completed in 2012; Iowa’s will be finished in 2014.

Of the 41 states with broad-based income taxes, 26 states do not tax Social Security benefits. Only five states, including Nebraska, currently tax Social Security benefits to the same extent as the federal government. [Source: AARP Issue Brief 84]