Nebraska Stopped Taxing Social Security. Here’s What A Retirement In Omaha Costs Now

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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.

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.

The post Nebraska Stopped Taxing Social Security. Here’s What a Retirement in Omaha Costs Now appeared first on 24/7 Wall St..