Updated October 16, 2026. Quick answer: Nebraska taxes 403(b) and 457(b) withdrawals like other income: the booklet’s retirement-income adjustments are for military retirement, Civil Service Retirement System annuities, Railroad Retirement Board benefits and Social Security, none of which covers these plans, and it names 403(b) plans only for a deduction of contributions by certain chaplains, not for distributions.
More state retirement-income schedules, line by line: Nebraska Schedule I.
Nebraska at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Taxed like other income; the 403(b) is named only for chaplains’ contributions, and 457(b) is not named |
| Do the state’s documents name these plans? | The documents read name 403(b) plans but not 457(b) plans |
| Retirement exclusion or credit | Military retirement exclusion and a Civil Service Retirement System annuity adjustment; no general retirement-plan exclusion |
| Public-employee pension rule | No state or local public-employee exclusion is described; the federal annuity adjustment covers CSRS annuities, not FERS |
| Rate in the documents read | 5.20% top rate for 2025 in the booklet; 4.55% for 2026 in the statute |
| Changed for 2026? | Statute 77-2715.03 sets the top rate at 4.55% for taxable years beginning on or after January 1, 2026 |
What the Nebraska documents say
Line 32 of the Form 1040N booklet says all military retirees are allowed to “exclude 100% of the military retirement benefits” from Nebraska income to the extent they are in federal AGI. The booklet adds a CSRS annuity adjustment and warns that the exclusion “does not apply to annuities received under the Federal Employees Retirement System”.
The booklet’s only 403(b) entry is a line for contributions by certain chaplains to section 403(b) plans. The statute prints the 2026 top rate as 4.55% for taxable years beginning on or after January 1, 2026.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The booklet does not name 457(b) plans.
- Its 403(b) entry concerns chaplains’ contributions, not distributions.
- The 2026 rate comes from the statute; the booklet is for tax year 2025.
Common mistakes
- Assuming Nebraska’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Nebraska taxes 401(k) and IRA withdrawals, Nebraska retirement taxes, whether Nebraska taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- 2025 Nebraska Individual Income Tax and Amended Return Booklet (Form 1040N instructions): https://revenue.nebraska.gov/sites/default/files/doc/tax-forms/2025/f_Individual_Income_Tax_Booklet.pdf
- Neb. Rev. Stat. 77-2715.03 Individual income tax brackets and rates: https://nebraskalegislature.gov/laws/statutes.php?statute=77-2715.03
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.