Updated October 5, 2026. Quick answer: Yes. Nebraska taxes trust income at graduated rates of 2.46% to 5.20% for 2025, and the Form 1041N instructions state that “Resident estates and trusts compute their tax using the tax schedule below” while nonresident estates and trusts use the same schedule on Nebraska Schedule I.
How Nebraska treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Nebraska taxes resident trusts on their income and nonresident trusts on Nebraska source income, and the fiduciary reports it on Form 1041N, the Nebraska Fiduciary Income Tax Return. |
| Who counts as a resident trust | Residence follows the domicile of the trust creator, not the trustee. The instructions say the residence of the estate or trust is tied to the domicile of the decedent at death or of the creator when the trust became irrevocable, and that “The residence of the trustee or personal representative does not affect” the residence of the estate or trust. |
| Rate on trust income | The 2025 fiduciary schedule taxes the first $660 at 2.46%, income from $660 to $6,290 at 3.51%, income from $6,290 to $20,300 at 5.01%, and the top bracket is printed as “$915.75 + 5.20% of the excess over $20,300”. |
| Distribution deduction | The Nebraska form and instructions read print no separate income distribution deduction line. Line 2 of Form 1041N tells the filer to enter “the federal taxable income as shown on the federal return” and line 3 then adjusts for undistributed income from U.S. obligations. |
| Nonresident trusts | A nonresident trust pays only the part of the resident tax that is attributable to Nebraska sources. Section 77-2717 describes this as the portion of the tax “attributable to the income derived from sources within this state” and Nebraska Schedule I computes it. |
| Return to file | The fiduciary files Form 1041N for a resident estate or trust, and for a nonresident one with Nebraska source income, when the estate or trust is “required to file a federal income tax return” for the taxable year. |
| Simple trust exception | The booklet excuses a resident trust from Form 1041N only if all listed conditions are met, including that the trust is “classified as a simple trust” with all beneficiaries Nebraska residents, all income from Nebraska sources and no federal tax liability. |
| Electing small business trusts | An electing small business trust with S corporation income from a Nebraska business computes tax on that income with a separate worksheet at the same rate schedule, and the instructions say it “must report and pay Nebraska income tax on the income”. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 2.46%, the tax is computed as $10,000 x 2.46% = $246; taxed wholly at the highest, 5.20%, it is computed as $10,000 x 5.20% = $520. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
Section 77-2715.03 sets the third and fourth rates at 4.55% for taxable years beginning in 2026 and 3.99% for 2027, but the 2025 fiduciary booklet read prints no 2026 trust rate schedule.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Nebraska taxes retirement income, whether Nebraska taxes pensions, what a living trust costs in Nebraska, federal trust tax brackets, and trust income tax by state.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for your trust
If your portfolio is $250,000 or more, this connects you (free, with no obligation to hire anyone) with 2 to 3 vetted advisors.
Before you start, what actually happens. The matching service is run by WiserAdvisor, an independent advisor-matching company. It opens on their site, asks for your ZIP code and a few questions, and matches you with 2 to 3 vetted advisors. It is free to you.
WiserAdvisor states the service is built for portfolios of $250,000 and above. By submitting, you consent to emails, phone calls and text messages from WiserAdvisor and up to three advisors, so expect to be contacted. Clear Money Guide may earn a referral payment for a qualifying completed form, whether or not you ever hire anyone.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your trust
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment through this service, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- 2025 Nebraska Fiduciary Income Tax Booklet with Form 1041N instructions (Nebraska Department of Revenue): https://revenue.nebraska.gov/sites/default/files/doc/tax-forms/2025/f_Fiduciary_Booklet.pdf
- Neb. Rev. Stat. 77-2717, income tax on estates and trusts (Nebraska Legislature): https://nebraskalegislature.gov/laws/statutes.php?statute=77-2717
- Neb. Rev. Stat. 77-2714.01, definitions of resident estate or trust (Nebraska Legislature): https://nebraskalegislature.gov/laws/statutes.php?statute=77-2714.01
- Neb. Rev. Stat. 77-2715.03, individual income tax brackets and rates (Nebraska Legislature): https://nebraskalegislature.gov/laws/statutes.php?statute=77-2715.03
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.