Updated October 4, 2026. Quick answer: Yes. Nebraska taxes 401(k) and IRA withdrawals as income. The 2025 booklet lists “retirement income (such as 401K distributions, pensions, etc.)” among the income included in federal AGI, which is where the Nebraska return starts, and prints no exclusion for private retirement accounts. The subtractions it does list cover Social Security, military retirement, Civil Service Retirement System annuities and railroad retirement.
More state retirement-income schedules, line by line: Nebraska Schedule I.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Nebraska tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Nebraska tax 403(b) and 457(b) withdrawals.
Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Nebraska tax withholding on IRA and 401(k) withdrawals.
Contributing to an HSA? How the state taxes it, from its own tax documents: Does Nebraska tax HSA contributions?.
What Nebraska does with 401(k) and IRA withdrawals
The booklet says “All military retirees are allowed to exclude 100% of the military retirement”. Of the Civil Service exclusion it says it “does not apply to annuities received under the Federal Employees Retirement System”. The line instructions describe the starting figure: “This is the amount reported on your federal return as AGI”. No sentence says in so many words that IRA withdrawals are taxed, so the answer rests on that starting point and on the absence of a 401(k) or IRA subtraction.
| Item | What the documents say |
|---|---|
| Treatment | Taxable; no 401(k) or IRA exclusion printed |
| Subtractions printed | Social Security (entire benefit), military retirement (100%), Civil Service Retirement System annuities (not FERS), railroad retirement |
| State rates, 2025 | 2.46% to a 5.20% top rate |
| State rate, 2026 | 4.55% top rate printed in the statute |
| Source | Nebraska Department of Revenue, 2025 1040N booklet and Tax Calculation Schedule; Neb. Rev. Stat. 77-2715.03 |
A $40,000 withdrawal
All $40,000 of a traditional withdrawal is part of Nebraska income. If $40,000 were a single filer’s whole Nebraska taxable income, the 2025 schedule’s top row (“$1,543.28 + 5.20% of the excess over $38,870”) gives $1,602.04 (computed as $1,543.28 plus 5.20% of the $1,130 above $38,870), before credits.
What changes in 2026
The statute prints a 4.55% rate for taxable years beginning in 2026 and 3.99% from 2027. The 2025 booklet lists no change to retirement-income treatment.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on these withdrawals in Publication 590-B, Distributions from Individual Retirement Arrangements and Publication 575, Pension and Annuity Income.
Related: whether Nebraska taxes pensions, how Nebraska taxes retirement income, whether Nebraska taxes Roth conversions, and the state-by-state table of 401(k) and IRA withdrawal tax.
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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
- 2025 Nebraska Tax Calculation Schedule for Individual Income Tax: https://revenue.nebraska.gov/sites/default/files/doc/tax-forms/2025/2025_Tax_Calculation_Schedule.pdf
- Neb. Rev. Stat. 77-2715.03 Individual income tax; rates: https://nebraskalegislature.gov/laws/statutes.php?statute=77-2715.03
Sources: the primary documents linked above, read on October 4, 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.