Loren Lippincott
The “missing year” of property tax relief in Nebraska refers to a gap in tax credits for school district property taxes paid in 2024, caused by changes made in Legislative Bill 34 during the 2024 special session. Here’s what happened: Prior system (2020–2023) – Under the Nebraska Property Tax Incentive Act (LB 1107, passed in 2020), taxpayers could claim a refundable income tax credit for a portion of property taxes paid to K-12 schools (up to 30 percent by 2023) and community colleges (55 percent by 2023). These credits were claimed the year after taxes were paid, via Form PTC (Property Tax Credit) when filing income tax returns. Property taxes are assessed in December of each year (e.g., Dec. 2023 for 2023 taxes) but are typically paid in installments the following year (e.g., 2024). About 85 percent of Nebraskans pay their taxes in this deferred manner and only about 15 percent pay their assessed taxes by Dec. 31 of the assessment year.
The change with LB 34, passed in Aug. 2024, eliminated the refundable income tax credit for school district property taxes paid on or after Jan. 1, 2024. Instead, it introduced the School District Property Tax Relief Act, which applies credits directly to property tax statements starting in Dec. 2024. This “front-loaded” system automatically reduces property tax bills without requiring taxpayers to file for credits. The intent of the change was to simplify the process, considering about 50 percent of eligible taxpayers were not claiming the income tax credits, thus missing out on relief. The new system ensures everyone benefits automatically.
The “missing year” Issue – The transition from the old to the new system created a gap for taxes paid in 2024 for the 2023 assessment year for two groups: the 15 percent who paid early and the 85 percent who paid in 2024. Property owners who paid their 2023 taxes by Dec. 31, 2023, could claim the 30 percent income tax credit on their 2024 tax returns (filed in 2025), as these payments occurred before the January 1, 2024, cutoff. Meanwhile, the vast majority of Nebraskans, who paid their 2023 taxes in 2024, cannot claim the income tax credit for these payments because LB 34 eliminated the credit for taxes paid after Jan. 1, 2024. They also don’t receive a direct credit on their 2023 tax bill, as the new system only applies to 2024 taxes assessed in Dec. 2024.
The impact of this gap means most taxpayers miss out on relief for their 2023 school taxes paid in 2024, effectively losing one year of credits. Estimates suggest this could cost Nebraskans $550– $750 million collectively, with individual losses ranging from hundreds to thousands of dollars (e.g., $1,300 for one homeowner and $11,000 for a farmer). Why did it happen? 1) An unintended consequence - Lawmakers who supported LB 34, later admitted the gap was unintentional, resulting from not anticipating the timing mismatch for taxpayers paying in arrears. 2) A retroactive effect - Critics argue LB 34 retroactively changed the rules, as taxpayers expected to claim credits for 2023 taxes paid in 2024 when filing their 2025 returns, based on the prior system.
Proposed fix - In 2025, Sen. Brian Hardin introduced LB 81 to extend the income tax credit for one more year, allowing taxpayers to claim relief for 2023 taxes paid in 2024. This would cost the state an estimated $102 million in 2024–25, $503 million in 2025–26 and $32 million in 2026–27, due to amended returns and administrative costs. As of March 2025, LB 81 was stalled in the Revenue Committee due to a projected $457 million state budget shortfall at that time. Sen. Brad von Gillern suggested keeping the bill alive for 2026 if fiscal conditions improve, but it lacked a priority designation, and did not advance in 2025. The Nebraska Society of CPAs and chambers of commerce support fixing the gap, citing its financial burden on farmers, ranchers and small businesses. This currently leaves taxpayers with no relief for 2024 payments. As of today, taxpayers who paid 2023 school taxes in 2024 cannot claim the income tax credit unless LB 81 or similar legislation passes in the future, so I wholeheartedly support LB 81!
Loren Lippincott represents Legislative District 34 in the Nebraska State Senate. Read his column in the Nance County Journal.