Active-duty pay
Taxed
Active-duty pay taxable to NE residents.
State Guide · NE
Nebraska — Military Tax Treatment
Nebraska's 2022 military retirement exemption was a landmark change. Active duty and Guard drill pay are still taxable. The Guard drill pay situation has been evolving — Nebraska DoR is the authority on current Guard-specific rules.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Nebraska income. Nebraska exempted military retirement in 2022 but Guard-specific drill pay exemptions are evolving — verify current rules with Nebraska DoR.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt as of 2022.
The numbers · verified for tax year 2025
Top marginal rate
5.20%
Retirement-pay exemption
Full
For tax years beginning on or after Jan 1, 2022, military retirees may exclude 100% of military retirement benefits from Nebraska taxable income — no dollar cap, no age threshold, no form required.
Standard deduction
For 2025 the standard deduction is $8,600 single / $17,200 MFJ (indexed). The top rate is phasing down fast — 4.55% in 2026, 3.99% in 2027 under LB754.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Nebraska included.
Survivor Benefit Plan (SBP)
Follows retirement
Nebraska exempts military retirement — SBP annuities are generally exempt.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Nebraska, Nebraska cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Nebraska can keep Texas as their tax domicile and avoid Nebraska state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Nebraska exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Retirement exemption: NE Form 1040N, Schedule I
- 02Guard drill pay: check NE DoR for current status — law has changed recently and may have additional Guard provisions
Veteran-specific tax benefits
Disabled veteran homestead exemption.
Official authority
https://revenue.nebraska.gov/ ↗State tax law changes annually. Verify current rules with the Nebraska Department of Revenue before making any tax decision.
Nebraska military tax — common questions
Does Nebraska tax military retirement pay in 2026?
Nebraska fully exempts military retirement pay. Military retirement pay fully exempt as of 2022.
Does Nebraska tax active-duty military pay?
Nebraska taxes active-duty military pay for state residents. Active-duty pay taxable to NE residents. Under the SCRA, Nebraska can only tax the military pay of service members who are legally domiciled in Nebraska — not those merely stationed there.
Does Nebraska tax National Guard and Reserve drill pay?
Nebraska taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Nebraska income. Nebraska exempted military retirement in 2022 but Guard-specific drill pay exemptions are evolving — verify current rules with Nebraska DoR.
Is VA disability compensation taxed in Nebraska?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Nebraska — taxes it as income.
If I'm stationed in Nebraska but claim another state, can Nebraska tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Nebraska cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides