Updated October 16, 2026. Quick answer: Tied to federal. Nebraska withholds from a resident’s periodic pension or annuity payment when the payee has chosen federal withholding, and the Department says payees who chose none “are not required to have state income tax withheld”.
More on public pension systems, topic by topic: Nebraska NPERS reemployment after retirement, Nebraska NPERS early retirement and Nebraska NPERS qualified domestic relations order.
Nebraska pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | Tied to federal withholding: if you chose federal withholding, Nebraska is withheld too |
| Default rate if you give the payer no form | No flat percent for periodic payments; the payer figures it from the Nebraska Circular EN tables, as for wages |
| Lump sum or one-time payment | Nonperiodic payments and eligible rollover distributions subject to the 10% or 20% federal rate are withheld at 5% of the distribution for state tax, though the Circular EN says premature distributions from an IRA are not subject to Nebraska withholding; the 2027 Circular EN lowers the rate to 3.5% for payments on or after January 1, 2027 |
| Form to start, change or stop it | Nebraska Form W-4N (Rev. 1-2022), given to the payer |
| Changed for 2026? | A new Circular EN applies to payments on or after January 1, 2027; no change effective in 2026 is described |
What the Nebraska documents say
Nebraska’s Department of Revenue says periodic pension and annuity withholding applies when the payee “has elected the payor to withhold federal income tax from the payments”. Payees who chose no federal withholding need not have state tax withheld.
The Department says the amount is “determined in the same manner as income tax withholding from wages”, using the Circular EN tables. The payer uses the allowances and marital status on the federal Form W-4P if that form was completed before January 1, 2022, and a Nebraska Form W-4N must be completed if the payee completes a federal Form W-4P on or after January 1, 2022.
For nonperiodic payments and eligible rollover distributions the Department says “Nebraska income tax will be withheld at a rate of 5%”, and that this cannot be exempted. The 2027 Circular EN says such payments on or after January 1, 2027 “will be withheld at a rate of 3.5% of the distribution”.
A payee who chose no federal withholding may write exempt on line 3 of Form W-4N, and a new W-4N is needed if federal withholding is later turned on or to add state withholding. The Department says “a Nebraska Form W-4N must be completed”.
What the printed rate means in dollars
For a $50,000 nonperiodic payment under the rate the Department prints for earlier payments: 5% of $50,000 is $2,500 (computed as $50,000 times 5%).
For the same $50,000 payment on or after January 1, 2027, under the rate the 2027 Circular EN prints: 3.5% of $50,000 is $1,750 (computed as $50,000 times 3.5%).
These are illustrations of the rate the state document prints, not a prediction of how your payer will calculate or what you will owe at filing.
What a mover should know
This page is about Nebraska as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, state tax withholding on IRA and 401(k) withdrawals in Nebraska covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The Department’s 2026 Circular EN could not be retrieved, so the periodic rule rests on the 2023 Circular EN and the 2022 Form W-4N. The 2027 Circular EN lowers the nonperiodic rate for payments on or after January 1, 2027.
Common mistakes
- Choosing no federal withholding and expecting state tax to be withheld anyway; in a state tied to federal withholding the two usually move together.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state tax withholding on IRA and 401(k) withdrawals in Nebraska, Nebraska retirement taxes, whether Nebraska taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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 retirement income
For U.S. investors with $250,000 or more in investable assets. WiserAdvisor is an independent service matching you with 2 to 3 vetted advisers. Its form asks for your ZIP code and answers to a few questions; a match is not guaranteed.
Free to request, with no obligation to hire. By submitting, you consent to calls, texts and emails from WiserAdvisor and up to three advisers. Advisers pay for introductions.
Clear Money Guide may earn a referral payment for a qualifying completed form. An introduction is not a Clear Money Guide recommendation.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your pension income
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 for a qualifying submitted form, 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
- Nebraska Circular EN Instructions (2023): https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/2023_Circular_EN_Instructions_0.pdf
- Employee’s Nebraska Withholding Allowance Certificate, Form W-4N (Rev. 1-2022): https://revenue.nebraska.gov/sites/default/files/doc/tax-forms/w4n.pdf
- 2027 Nebraska Circular EN: https://revenue.nebraska.gov/sites/default/files/doc/business/Cir_En_2026/2027cir_en_whole.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
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.