LINCOLN, NE – While a major tax policy overhaul will not emerge from the Nebraska Legislature before session ends next week, 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.
The vote to adopt Legislative Bill 1090 and make the necessary updates was 44 senators in support and none opposed.
Many states are making changes to their tax laws this year, since provisions of state tax codes are often based on federal laws. 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 will be subject to state income tax due in 2019 if the law remains 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.
“Both of these provisions will help to counter the accidental tax increase that will occur on Nebraskans if no action is taken,” Platte Institute Director of Government Relations Nicole Fox said at a February legislative hearing on the bill.
The bill now awaits the governor’s signature.