Legislature Prevents Imminent Income Tax Increase

While a major tax policy overhaul will not emerge from the Nebraska Legislature, state senators have approved adjustments to the state’s personal income tax that will prevent a tax increase. That hike would have occurred due to state policies that are now out of line with last year’s federal tax reform.
 
Many states are making changes to their tax laws this year, since provisions of state tax codes are often based on federal laws. Lawmakers in California, Georgia, Iowa, Maine, Missouri, New York, and South Carolina, among others have either passed legislation or are in process of changing their tax code to ensure federal tax reform doesn’t result in higher state taxes.

For example, under current law, Nebraska’s personal exemption credit is tied to the federal personal exemption. But last year, Congress eliminated the personal exemption in exchange for increases in standard deductions and child tax credits. That means more of a Nebraska taxpayer’s income would be subject to state income tax due in 2019 if the law remained the same.

LB1090 will create a new personal exemption in Nebraska, as well as increase Nebraska’s standard deduction, effectively canceling out any state tax increase resulting from federal tax changes.

There were no senators that opposed Legislative Bill 1090’s final vote and the bill now awaits the governor’s signature to be enacted into law.