Nebraska Stopped Taxing Social Security. Here’s What a Retirement in Omaha Costs Now
Nebraska quietly rewrote its retirement tax rules, and the change forces a harder question: does staying put actually pencil out once you run the full numbers on an Omaha budget?
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Many Nebraskans spent their working years assuming they’d have to leave the state to make their retirement money last. The tax code was a big part of that thinking. IRS migration data shows about 2,559 Nebraskans moved to Florida and 1,644 to Arizona in the 2022-2023 filing data, though that data covers all movers and doesn’t single our retirees.
Then the state ended its Social Security tax, phasing in an exemption under LB 873 until it reached 100% for tax year 2025. The exemption was estimated to cost the state $168 million a year. A practical question remains for anyone considering staying put: what does retirement in Omaha cost now?
Which Retirement Income Nebraska Still Taxes
Social Security is out of the state tax base. Military retirement pay has been 100% excluded beginning with the 2022 tax return. IRA withdrawals, 401(k) money, and most pensions are still taxed at graduated rates that run from 2.46% to 4.55%. Under LB754, the top rate is set to fall to 3.99% for 2027 and subsequent years.
The state sales tax is 5.5%, and the average combined state and local rate is 6.98%. Omaha is among the cities with a 7.5% rate. The effective property tax rate on owner-occupied homes is 1.44%, and property taxes make up 34.9% of state and local tax revenue.
What an Omaha Budget Looks Like for a Couple and a Single Retiree
Nebraska’s cost of living index is 90.103, compared with 110.72 in California. Average U.S. household spending was $81,905 in 2025. Adjusted to Nebraska prices, that comes to roughly $73,800 a year, or about $6,150 a month, which is the couple’s budget used here. For a single retiree, the assumption here is $50,000 a year.
Omaha’s FHFA price index rose 4.15% over the past year and 40.14% over five years. On an assumed $300,000 paid-off house, the effective rate works out to $4,320 a year, or $360 a month. Medicare Part B is $202.90 per person per month.
| Annual line item | Couple | Single |
|---|---|---|
| Property tax (assumed $300,000 home) | $4,320 | $4,320 |
| Medicare Part B | $4,870 | $2,435 |
| Food, utilities, insurance, Medigap, Part D, car, maintenance, gifts, reserves, income tax | $64,610 | $43,245 |
| Total | $73,800 | $50,000 |
Turning the Gap Into a Portfolio Number
A retired couple where both spouses collect benefits gets $3,208 a month, or $38,496 a year, on average. The gap comes to $35,304. Covering it at 4% takes about $882,600. At a more conservative 3.5%, it’s closer to $1.01 million. The average single retiree collects $2,071 a month, or $24,852 a year. A $25,148 gap remains, with a portfolio target of about $628,700 at 4%. Delaying Social Security increases the monthly benefit, which would lower both portfolio figures.
Americans 62 and older saw prices rise 3.6% over the past year, while the 2026 COLA was 2.8%. The Trustees also project the combined Social Security trust funds paying 83% of scheduled benefits after depletion in 2034. Some retirees use Treasury ladders and annuities to cover part of that risk. Winter heating and travel costs from Eppley Airfield also factor into the budget.
How IRA Withdrawals Can Cost a Homestead Break
Nebraska’s homestead exemption for residents over 65 exempts the full value of the home, up to a county cap, for married families with income up to $43,400.99 and single filers up to $37,000.99. The relief shrinks as income rises and eventually disappears.
The state uses its own definition of family income, which can include untaxed money. A large IRA withdrawal or a Roth conversion in a single year can reduce or eliminate the break. Some couples draw from taxable accounts or cash while an application is pending, keeping family income within the bands.
For a couple, an Omaha retirement on this budget comes down to about $882,600 at 4%, or roughly $1 million at 3.5%. A single retiree needs about $628,700. The gap between those two figures is the whole argument against relying on a single withdrawal rate, which we laid out in a free report on why the 4% rule wobbles now. The Social Security exemption removes state tax on that portion of income. Property tax is the cost that changes most from house to house, and it depends on the county’s levy and the assessment on the specific house.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
