According to the Nebraska filing instructions, active duty pay is taxed only by the state where you are a legal resident.
If you are a resident of Nebraska, include all of your income on your resident return regardless of where it was earned.
If you are a nonresident of Nebraska, your active duty pay is not taxable to Nebraska although it may be taxable in your resident state. Any other income while in Nebraska that is not active duty military pay is taxable on the Nebraska return. If your only source of income is your active duty pay, you are not required to file a Nebraska nonresident return. If you are required to file a Nebraska nonresident return, your military pay will not be pulled to the Nebraska return unless Nebraska is listed on the W-2 as the home of record.
If one spouse is a Resident of Nebraska and the other is not, you may elect to file a married filing joint return where both spouses will be taxed as residents or a married filing separate return.
The married filing separate return for the resident of Nebraska can be created by following these steps in the program:
- State Section
- Edit Nebraska Resident Return
- Begin Basic Information
- Select Active Military for the Special Filing Status
- Begin on Change Filing Status from MFJ to MFS for state purposes only
- Do you want to changes the state filing status from MFJ to MFS - Select "Yes"
- Select who you are filing the MFS return for
- Complete the form for the resident of Nebraska
- Continue to save
The nonresident of Nebraska will need to create a separate account in the program and file the nonresident state return separately.
Military Retirement:
All military retirees are allowed to exclude 100% of the military retirement benefits from the income subject to Nebraska income tax to the extent included in the federal adjusted gross income.
You can enter your Military Retirement subtraction by following these steps in the program:
- State Section
- Edit Nebraska Resident Return
- Begin Subtractions from Income
- Military Retirement
- Enter amount of Military Retirement
- Continue to save
For more information, see