316 Neb. Admin. Code, ch. 22, § 002 - COMPUTING THE NEBRASKA INDIVIDUAL INCOME TAX
002.01
Resident individuals. The Nebraska individual income tax is
imposed for each taxable year on the entire income of every resident
individual. The tax is a percentage of the taxpayer's Nebraska taxable income
for the taxable year plus a percentage of the federal alternative minimum tax
and the federal tax on premature or lump-sum distributions from qualified
retirement plans. Taxpayers whose federal adjusted gross income is larger than
the threshold amount determined under section 68 of the Internal Revenue Code
(IRC) will recalculate their tax on taxable income by multiplying the maximum
tax rate by ten per cent of the excess amount above the section 68 threshold
and subtracting from the result the amount of tax from the tax table. This
result will be added to the tax from the tax table.
002.02
Nonresident individuals.
The Nebraska individual income tax is imposed for each taxable year on the
income of every nonresident individual which is derived from sources within
Nebraska. The tax is a percentage of the tax owed by a resident individual with
the same total income. The percentage is determined by dividing the taxpayer's
Nebraska adjusted gross income as determined in Reg-
22-003 by the taxpayer's federal
adjusted gross income after the adjustments provided in Reg-
22-002.04.
002.03
Partial-year resident
individuals. The Nebraska individual income tax is imposed for each
taxable year on all of the income of every partial-year resident which is
earned while a resident of Nebraska and is not taxed by another state, and the
income derived from sources within Nebraska while a nonresident. The tax is a
percentage of the tax owed by a resident individual with the same taxable
income. The percentage is determined by dividing the taxpayer's Nebraska
adjusted gross income as determined in Reg-
22-004 by the taxpayer's federal
adjusted gross income after the adjustments provided in Reg-
22-002.04.
002.04
Determining Nebraska taxable
income. Nebraska taxable income is the taxpayer's federal adjusted gross
income after Nebraska adjustments and after the deduction provided in either
Reg-
22-002.08 or Reg-
22-002.09.
002.05 The Nebraska adjustments which are
subtracted from federal adjusted gross income are as follows:
002.05A
Income from federal
obligations. Any interest and dividends received on United States
obligations to the extent such interest and dividends are included in federal
adjusted gross income but exempt from state income taxes under the laws of the
United States shall be subtracted. The amount subtracted on account of such
interest and dividends must be reduced by any interest on indebtedness incurred
to carry such obligations and by any expense incurred in the production of such
income to the extent such expense or interest was deducted in determining
federal taxable income.
002.05A(1) United
States obligations which are exempt include the following:
002.05A(1)(a) Series E, F, G, H, and I
savings bonds;
002.05A(1)(b) United
States Treasury bills;
002.05A(1)(c) U.S. Government
notes;
002.05A(1)(d) U.S.
Government bonds;
002.05A(1)(e)
U.S. Government certificates;
002.05A(1)(f) Interest on debentures issued
to mortgages of mortgagees foreclosed under provisions of the National Housing
Act if insured after February 3, 1938;
002.05A(1)(g) Retirement bond as provided by
IRC section 409;
002.05A(1)(h)
Federal Farm Credit Bank consolidated systemwide bonds;
002.05A(1)(i) Federal Land Banks and
Associations;
002.05A(1)(j) Federal
Intermediate Credit Bank;
002.05A(1)(k) Commodity Credit
Corporation;
002.05A(1)(l) Federal
Farm Mortgage Corporation;
002.05A(1)(m) Federal Home Loan
Banks;
002.05A(1)(n) Reconstruction
Finance Corporation;
002.05A(1)(o)
General Services Administration Participation Certificates;
002.05A(1)(p) Central Bank for Cooperatives
(interest only);
002.05A(1)(q)
Federal Reserve Banks;
002.05A(1)(r) Federal Savings and Loan
Insurance Corporation;
002.05A(1)(s) Production Credit Association
(interest only);
002.05A(1)(t)
Tennessee Valley Authority bonds;
002.05A(1)(u) Postal Service bonds;
002.05A(1)(v) Federal Deposit Insurance
Corporation (interest only); and
002.05A(1)(w) Student Loan Marketing
Association (interest only).
002.05A(2) Income from Regulated Investment
Companies investing directly in U.S. Government obligations is subtracted to
the extent they represent U.S. Government obligations.
002.05A(3) Interest income from repurchase
agreements involving U.S. Government obligations is not deductible.
002.05B
Refund of State and
Local Income Tax. Any refund of state or local income tax which was
included in federal adjusted gross income shall be subtracted.
002.05C
Income from S corporations and
LLCs.
002.05C(1) Any income from S
corporations and limited liability companies (LLCs) which was not connected
with or derived from Nebraska sources shall be subtracted.
002.05D
Dividends Received from a
Corporation not Subject to the IRC. Any dividend which was received from
a corporation which was not subject to the Internal Revenue Code shall be
subtracted.
002.05E
Amount
Repaid for Which a Reduction in Federal Income Tax was Taken. Any amount
which was repaid and for which the taxpayer received a reduction in federal tax
under IRC section 1341(a)(5) shall be subtracted.
002.05F
Railroad Retirement Board
payments. Railroad Retirement Board payments to retired railroad
employees or their families that are included in federal adjusted gross income,
including Tier I and II, Supplemental Annuity, and Dual Vested Benefits as
reported on Forms RRB-1099 and RRB-1099-R issued by the Federal Railroad
Retirement Board, shall be subtracted.
002.05G.
Special Capital Gains
Exclusion. Capital gains excluded due to an election exercised under
provisions of section
77-2715.08
of the Nebraska Revised Statutes shall be subtracted as provided in Reg-
22-020.
002.05H.
Nebraska Net Operating
Losses. A Nebraska net operating loss carryback or carryover shall be
subtracted as provided in Reg-
22-005.
002.05I.
Native American Indian
Reservation Income. The income earned within the boundaries of a
recognized Indian reservation by a Native American Indian who is an enrolled
member of an Indian tribe and who resides in Nebraska on an Indian reservation
shall be subtracted.
002.05I(1) No income tax
return is required if a reservation Indian's income is earned entirely within
the boundaries of an Indian reservation in Nebraska.
002.05J
Long-Term Care Savings
Plan. Deposits into qualifying long-term care savings plan accounts at
participating Nebraska banks of up to $2,000 for married-filing-joint filers or
$1,000 for all other filers, to the extent not deducted for federal income tax
purposes, shall be subtracted.
002.05J(1) Any
interest or dividends earned from a qualifying long-term care savings plan
account within the taxable year, to the extent not deducted for federal income
tax purposes, shall be subtracted.
002.05K
Nebraska College Savings
Plan. Contributions by a participant in the Nebraska Educational Savings
Plan Trust shall be subtracted to the extent not deducted for federal tax
purposes .
002.05K(1) For tax years beginning
on or after January 1, 2007, the deduction may not be more than $2,500 for a
married filing separate tax return and $5,000 for single, head of household,
and married joint returns. Only the participant owner may claim the
subtraction.
002.05K(2) For tax
years beginning on or after January 1, 2000, and before January 1, 2007, the
deduction may not be more than $500 for a married filing separate tax return
and $1,000 for single, head of household, and married joint returns. Only the
participant owner may claim the subtraction.
002.05K(3) Any gift, grant, or donation made
to the Nebraska Educational Savings Plan Trust for deposit in the endowment
fund of the trust, to the extent not deducted for federal income tax purposes,
shall be subtracted.
002.05L
Bonus Depreciation
Subtraction. A portion of the amount of bonus depreciation added for
assets placed in service between September 10, 2001 and December 31, 2005 shall
be subtracted .
002.05L(1) Twenty percent of
the total amount of bonus depreciation added back for tax years beginning or
deemed to begin before January 1, 2003, may be subtracted in the first taxable
year beginning or deemed to begin on or after January 1, 2005, under the
Internal Revenue Code of 1986, as amended, and twenty percent in each of the
next four following taxable years.
002.05L(2) Twenty percent of the total amount
of bonus depreciation added back for tax years beginning or deemed to begin on
or after January 1, 2003, may be subtracted in the first taxable year beginning
or deemed to begin on or after January 1, 2006, under the Internal Revenue Code
of 1986, as amended, and twenty percent in each of the next four following
taxable years.
002.05M.
Enhanced Section 179 Subtraction. A portion of the amount added
for capital investment expensed under IRC section 179 in excess of twenty-five
thousand dollars for taxable years beginning or deemed to begin on or after
January 1, 2003, and before January 1, 2006 shall be subtracted.
002.05M(1) Twenty percent of the total amount
of expensing added back for tax years beginning or deemed to begin on or after
January 1, 2003, may be subtracted in the first taxable year beginning or
deemed to begin on or after January 1, 2006, and twenty percent in each of the
next four following tax years.
002.06 The Nebraska adjustments which are
added to federal adjusted gross income are as follows:
002.06A
Income from state and local
obligations. Any interest and dividends received from state and local
obligations, other than obligations issued by the State of Nebraska or its
political subdivisions, to the extent such interest and dividends are excluded
from federal gross income shall be added. The amount added on account of such
interest and dividends may be reduced by any interest on indebtedness incurred
to carry such obligations and by any expense incurred in the production of such
income to the extent such expense or interest was not deducted in determining
federal taxable income.
002.06A(1) Dividends
and income received from Regulated Investment Companies which are attributable
to obligations described in Reg-
22-002.06A shall
be added.
002.06B
Losses from S corporations and LLCs. Any loss from S corporations
and Limited Liability Companies (LLCs) which was not connected with or derived
from Nebraska sources shall be added.
002.06C
Federal Net Operating
Losses. A Federal net operating loss carryback or carryover shall be
added as provided in Reg-
22-005.
002.06D
Long-Term Care Savings Plan
Nonqualified Withdrawals. Any withdrawal of deposited funds or interest
or dividends from a long-term care savings plan account shall be added to the
extent that the amount was previously deducted under Reg-
22-002.05J or
Reg-
22-002.05J(1)
upon cancellation or termination of the plan or if the withdrawal is:
22-002.06D(1) Not made to pay or reimburse
for long-term care expenses during the taxable year, for the participant, the
participant's spouse, or another person for whom the participant has an
insurable interest;
22-002.06D(2)
Not made by a participant who is over 50 years of age or who turned 50 years of
age during the taxable year to pay or reimburse for long-term care insurance
premiums during the taxable year for the participant, the participant's spouse,
or another person for whom the participant has an insurable interest;
22-002.06D(3) Not due to the death of the
participant; or
22-002.06D(4) Not
made to transfer funds to a long-term care savings plan of the participant's
spouse.
002.06E
Financial Institution Tax of a Shareholder. A shareholder of a
financial institution organized as an S corporation who claims the Nebraska
credit for financial institution tax must add to income the amount of the
credit taken.
002.06F
Federal
Bonus Depreciation. For taxable years beginning or deemed to begin
before January 1, 2006, federal adjusted gross income shall be increased by
eighty-five percent of the amount of any federal bonus depreciation received
under section 168(k) or section 1400L of the Internal Revenue Code of 1986, as
amended, for assets placed in service after September 10, 2001, and before
December 31, 2005.
002.06G
Section 179 Expense in excess of twenty-five thousand dollars. For
taxable years beginning or deemed to begin on or after January 1, 2003, and
before January 1, 2006, federal adjusted gross income shall be increased by the
amount of any capital investment that is expensed under section 179 of the
Internal Revenue Code of 1986, as amended, that is in excess of twenty-five
thousand dollars that is allowed under the federal Jobs and Growth Tax Act of
2003.
002.06H
Nebraska
College Savings Plan. Any nonqualified withdrawals or any amounts
withdrawn because of cancellation of a participation agreement, including a
withdrawal for the purpose of a rollover to an IRC §529 plan in another
state, shall be added to income, to the the extent not included for federal
income tax purposes .
002.07
Determining Nebraska minimum
tax. The Nebraska minimum tax is computed as a percentage of the federal
alternative minimum tax which is adjusted by substituting Nebraska taxable
income (federal AGI less Nebraska standard or itemized deductions) for federal
taxable income, and adjusting for any items which are reflected differently in
the determination of federal taxable income for Nebraska purposes.
002.07A Items which are reflected differently
include:
002.07A(1) Nebraska standard
deduction;
002.07A(2) Substituting
Nebraska itemized deductions for federal itemized deductions, including using
the Nebraska itemized deductions calculated on the Nebraska Itemized Deduction
Worksheet;
002.07A(3) Using only
Nebraska-source private activity bond income when reporting post-August 7, 1986
private activity bond tax-exempt interest;
002.07A(4) Deducting any state or local
income tax from the reported taxes;
002.07A(5) Substituting the Nebraska net
operating loss for any federal net operating loss;
002.07A(6) Substituting zero (0) for any
alternative minimum tax foreign tax credit.
002.07B The federal credit for prior year
minimum tax, after the recomputations noted above, is allowed as a credit
against any tax calculated by the taxpayer.
002.07B(1) The rate used to calculate the
current year's Nebraska minimum tax shall also be used to calculate the credit.
002.07C The Nebraska
tax also includes a tax computed as a percentage of the federal tax on
premature or lump-sum distributions from qualified retirement plans. This
includes those taxes reported on Federal Forms 5329 (Tax on Early Distributions
(including an IRA)) and 4972 (Tax on Lump-Sum
Distributions).
002.08
Standard Deduction. Every taxpayer who is allowed a federal
standard deduction is allowed a deduction for state purposes except as provided
in Reg-
22-002.08A.
002.08A. For tax years beginning on or after
January 1, 1993 and before January 1, 2007, the standard deduction for a
taxpayer whose federal adjusted gross income is greater than the threshold
amount determined under IRC section 68 for the disallowance of itemized
deductions will be reduced by the following amount. The amount of federal
adjusted gross income in excess of the threshold amount is multiplied by 10%,
and the result is subtracted from the taxpayer's state standard
deduction.
002.08B For tax years
beginning on or after January 1, 2003 and before January 1, 2007, every
individual who did not itemize deductions on his or her federal return is
allowed to subtract from federal adjusted gross income a standard deduction
based on the filing status used on the federal return as the amount is adjusted
under Reg-
22-002.08A. The
standard deduction is the smaller of the federal standard deduction actually
allowed or the Nebraska standard deduction.
002.08B(1) Taxpayers who are allowed
additional federal standard deduction amounts because of age or blindness are
allowed an increase in the Nebraska standard deduction for each additional
amount allowed on the federal return.
002.08C For tax years beginning or deemed to
begin on or after January 1, 2004 and before January 1, 2007, the state
standard deduction amounts in this regulation will be adjusted for inflation by
the method provided in section 151 of the Internal Revenue Code. If any amount
is not a multiple of ten dollars, the amount shall be rounded to the next
highest multiple of ten dollars except that the standard deduction for married
filing separate taxpayers may be a multiple of five dollars.
002.08D For tax years beginning on or after
January 1, 2007, every individual who did not itemize deductions on his or her
federal return is allowed to subtract from federal adjusted gross income a
standard deduction based on the filing status used on the federal return.
002.08D(1) The standard deduction amounts,
including the additional standard deduction amounts, shall be adjusted for
inflation by the method provided in section 151 of the Internal Revenue Code of
1986, as amended. If any amount is not a multiple of fifty dollars, the amount
shall be rounded to the next lowest multiple of fifty dollars.
002.08D(2) The standard deduction is the
smaller of the federal standard deduction actually allowed or the Nebraska
standard deduction.
002.09
Itemized deductions.
Every taxpayer who used federal itemized deductions is allowed to deduct the
greater of the standard deduction as provided in Reg-
22-002.08 and Reg-
22-002.08A and
the itemized deductions after subtracting any state or local income taxes and
as limited by Reg-
22-002.09A.
002.09A Taxpayers whose federal adjusted
gross income is greater than the threshold amount determined under IRC section
68 for the disallowance of itemized deductions will calculate the excess amount
which is over the threshold for the purpose of determining itemized deductions.
For tax years beginning on or after January 1, 1993 and before January 1, 2007,
if an individual's adjusted gross income exceeds the statutory threshold
amount, the amount allowable for itemized deductions must be reduced by the
lesser of (1)10% of the excess of adjusted gross income over the threshold
amount, or (2) 80% of the amount of the itemized deductions otherwise allowable
for the taxable year. The limitation does not apply to deductions for medical
expenses, casualty and theft losses, investment interest expenses, charitable
contributions (after tax year 1994), or certain gambling losses. State and
local income tax is not allowed as an itemized deduction under Nebraska law and
is therefore not subject to further limitation.
002.09A(1) For tax years beginning on or
after January 1, 2007, Nebraska itemized deductions for taxpayers whose federal
adjusted gross income is greater than the threshold amount determined under IRC
section 68 for the disallowance of itemized deductions, shall be the amount of
the federal itemized deductions actually allowed minus the total amount of
state and local income tax before any limitation.
002.09B A taxpayer who itemizes deductions
and elects to deduct state and local sales taxes in lieu of state income tax on
his or her federal return will not add back the amount of this
deduction.
002.09C A taxpayer
deducting state income tax as a federal itemized deduction cannot elect to
deduct sales and use taxes for state purposes.
002.10
Alternative method--nonresidents
or partial-year residents. If the above provisions attribute more or
less income tax to Nebraska than is reasonably attributable to income derived
from sources within this state, the taxpayer may petition for, or the State Tax
Commissioner may require, the employment of any other method to attribute to
Nebraska an amount of income tax which is reasonable and equitable under the
circumstances.
Notes
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No prior version found.