More Tax Reductions on the Way
The Legislature last year crafted a new wrinkle for taxpayers who pay property taxes and file Nebraska income taxes—a refundable income tax credit for property taxes paid to schools—and appropriated $125 million towards the credit to offset property taxes paid in 2020. Taxpayers who claimed the credit on their 2020 income tax filings saw a reduction in taxes equal to 6 percent of property taxes paid to schools.
The credit applies to property taxes paid on real property (land, buildings, residences), but not taxes levied for bond repayments or as the result of voter-approved overrides of levy limits. Nebraska Farm Bureau estimates the credit equaled $939 per Nebraska farm and $126 for owners of a $200,000 home in Omaha/Lincoln. Property taxes paid to schools averaged $15,648 per farm and roughly $2,100 for owners of $200,000 homes.
Another wrinkle of the credit is that it increases if fiscal year state revenues exceed projections by more than 103.5 percent. Excesses above 103.5 percent go towards boosting the credit amount. The Nebraska Economic Forecasting Board’s latest estimates project revenue growth for this fiscal year ending June 30 will exceed the trigger. Thus, estimates now peg the credit amount for 2021 at $358 million, nearly three times the 2020 credit. If realized, the credit would equal approximately 16 percent of taxes paid to schools. The average per farm credit would equal $2,472 while the $200,000 homeowners in Omaha/Lincoln would see a credit of $336. It will be sometime in mid-July when the state’s books are closed, and the final credit amount is known. Whatever the final number, though, Nebraska property taxpayers can look forward to an increased credit when filing 2021 income taxes.