Nebraska’s retirees are set to experience a significant transformation in how they handle taxes in retirement, thanks to the One Big Beautiful Bill Act (OBBBA) passed by the Trump administration. The 2026 tax season officially opened on Jan. 26, and the updated code includes changes that could save taxpayers money on their 2025 filings.
In Nebraska, the new “senior deduction” means that an estimated 300,000 seniors will no longer pay federal income tax on their Social Security benefits. This offers much-needed relief in a state where cost-of-living concerns continue to grow for retirees on fixed incomes.
But that’s not to say that all seniors will benefit from this new exemption.
What the Senior Deduction Means for Seniors Nationwide
While the OBBBA has fundamentally shifted the tax landscape, it is vital to clarify that Social Security remains federally taxable. The legislation did not exempt these benefits directly, but instead created the senior-specific deduction: $6,000 for individuals aged 65 and over and $12,000 for married couples filing jointly starting in 2025. This deduction is layered on top of the expanded standard deduction and preexisting age-based benefits, effectively offsetting the taxable portion of Social Security for the vast majority of recipients.
Nationally, the result of this policy is that 88% of seniors will not pay any federal tax on Social Security benefits—a sharp increase from just 64% under the prior tax code. Calling it “the largest tax break in history for America’s seniors,” the White House says the policy is designed to help retirees “save more of their money” after decades of contributing to the system. For the 2026 tax year, total deductions can reach up to $23,750 for individuals and $46,700 for married couples filing jointly.
Beyond the tax-specific updates, Nebraskans should account for the 2026 Cost-of-Living Adjustment (COLA). Approximately 75 million Americans will see a 2.8 percent increase in Social Security and SSI benefits. These Social Security increases begin in January 2026, while Supplemental Security Income (SSI) increases take effect on December 31, 2025.
Specific threshold updates have also been implemented for the new year. The taxable maximum earnings have increased to $184,500. For seniors who continue to work while receiving benefits, the earnings limit for those under full retirement age is now $24,480, with $1 deducted for every $2 earned over that limit. For those reaching full retirement age in 2026, the limit is $65,160, with $1 deducted for every $3 over until the month of their birth. There is no earnings limit for those who are at or above full retirement age for the entire year.
In Nebraska, Seniors Stand to Benefit
Nebraska has a senior population of approximately 340,000—around 17.23% of the state’s 1.97 million residents, according to the most recent census data. This group accounts for about 0.57% of the national 65+ population. According to White House estimates, 300,000 are expected to benefit from the OBBBA’s senior deduction policy.
The bill also brings broader economic gains for residents of all ages. Nebraska workers are expected to see real-wage increases between $3,700 and $6,600, and real take-home pay increases ranging from $7,300 to $10,300. These gains could provide added financial support for multigenerational households or adult children supporting aging parents.
In addition, Nebraska is slated to receive 1,600 new housing units via Opportunity Zone incentives. These projects are aimed at revitalizing economically distressed communities and may help expand affordable housing options for seniors on fixed incomes.
Who Benefits Most—and Who Doesn’t
While the deduction offers significant relief, it doesn’t apply equally to all retirees. Seniors who already owe no federal income tax—often those living solely on Social Security—won’t benefit, as the deduction only reduces taxable income and is not refundable.
On the other hand, high-income seniors are also ineligible. The benefit begins to phase out at $75,000 for individuals and $150,000 for couples, and is fully eliminated at $175,000 and $250,000.
That leaves middle-income retired homeowners as the main group poised to benefit—particularly those still paying federal income taxes and dealing with rising property taxes or insurance premiums. These households can also take advantage of the new SALT (state and local tax) deduction cap, which jumps from $10,000 to $40,000 under the OBBBA.
What Nebraska Retirees Need to Know
The senior deduction is authorized only through the 2028 tax year, meaning its future will depend on congressional action. For now, the deduction could offer a few years of real financial relief—enough to help some Nebraska retirees stay in their homes or offset rising costs tied to healthcare, food, and home maintenance.
While not all retirees will qualify, for many Nebraskans, the One Big Beautiful Bill could be just enough to bring peace of mind and greater financial stability in retirement.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.