Nebraska LLC Taxes

A single-member LLC (SMLLC) is, by default, taxed as a sole proprietorship, whereas a multi-member LLC gets taxed as a partnership automatically. There are two federal tax forms that LLCs with default status need to file:

• Single-member LLC—Form 1040 (usually Schedule C, but some SMLLCsfile C-EZ, E, or F)
• Multi-member LLC—Form 1065

However, the default option isn’t the only tax option for your Nebraska LLC. A Nebraska LLC can elect S-corp or C-corp tax status instead of maintaining your default tax status. Below, we’ll discuss your various tax options and how each one can affect your LLC.

Nebraska LLCs taxed as S-corp

S-corp tax status can be a benefit to some LLCs. If you want to elect S-corp status, you can do so by filing Form 2553 with the IRS. Like LLCs with default status, S-corps are taxed as pass-through entities. This means LLCs taxed as S-corps don’t have to worry about paying corporate income tax. LLCs taxed as S-corps can also make distributions to their members without indirectly forcing those members to pay the 15.3% federal self-employment tax.

It’s hard to know if your LLC will benefit from electing S-corp status, so we encourage you to seek professional advice before making a final decision. You’ll also need to see if your LLC meets the IRS requirements for S-corps before applying. LLCs with S-corp status report their income by filing Form 1120-S with the IRS.

LLCs taxed as C-corp 

Although very uncommon, your Nebraska LLC can elect to be taxed as a C-corp—meaning, your LLC would be taxed the same way as a corporation. So, your LLC would be responsible for paying corporate income taxes at the federal and state level. However, electing C-corp tax status could qualify your LLC for greater tax deductions. We recommend seeking advice from a CPA before changing your tax status.

C-corps file Form 1120 with the IRS and Form 1120-SN with the Nebraska Department of Revenue.

Learn how to apply for C-corp status as an LLC.

In 2022, Nebraska passed LB 873, which seeks to lower the maximum tax rates through 2027. Although, the minimum tax rate will remain the same at 2.46%, the maximum rate will gradually decline. Here’s a breakdown for the 2022 tax season based on income and filing and status:

Individuals

Married, filing jointly

Married, filing separate

For 2023, the maximum rate will be 6.64%. Then, 6.44% (2024). 6.24% (2025), 6.00% (2026), and 5.87% (2027).

Nebraska also levies a corporate income tax, which your LLC will be responsible for paying if you elect to be taxed as a C-corp. If you maintain your default status or elect S-corp status, your LLC will not have to file a Nebraska corporate income tax. But, if you do need to file, here’s a breakdown of the Nebraska corporate income tax rates:

For 2022:

• Between 0% – $100,000: 5.58% of your taxable income
• $100,001 and over: $5,580 plus 7.50% of anything over the first $100,000

For 2023:

• Between $0 – $100,000: 5.58% of your taxable income
• $100,001 and over: $5,580 plus 7.25% of anything over the first $100,000

The rates for revenue over $100,00 will drop slightly each year through 2027. However, the rates you’ll pay for income between $0 and $100,000 will remain at 5.58%.

Nebraska imposes a state sales and use tax at 5.5%. However, most cities and counties tack on their own sales tax on top the 5.5% the state assesses. For example, Harrison assesses a sales tax at 1.5%, making the total 7.0%. However, Silver Creek only adds an additional 1.0%, for a total of 6.5%. To find out your local sales tax rate, use the Nebraska Department of Revenue’s Sales Tax Rate Finder.

You’ll need to follow the local tax laws in the city where your LLC is based, plus anywhere else that you do business. In addition to sales tax, some municipalities charge a local tax on certain goods and services. Nebraska cities and counties can add between 0.5% and 2% sales tax to the base rate levied by the state. In some cases, the city charges a maximum 2% and the county charges another 0.5%, meaning you can pay as much as 8% sales tax on some items and services, such as clothing, movie tickets, and pest control services.

Some Nebraska cities also charge an occupation tax to places like restaurants, bars, and hotels. For instance, Lincoln charges a 2% restaurant occupation tax on top of the city and county’s combined 7.25% sales tax rate. This means restaurant owners must make occupation tax payments along with the required sales tax payments.

Here are some other taxes that are imposed by the state of Nebraska.

Nebraska State Employer Taxes

If you are an employer, you will need to pay unemployment insurance and workers’ compensation taxes.

• Unemployment Insurance (UI) Tax— Nebraska employers pay unemployment insurance taxes based on an experience rating that ranges from 1 to 20. The Nebraska Department of Labor calculates the experience rating using “individual employer’s actual experience and a comparison of the employer’s experience to an array of other employers.” The lowest possible rate is 0%, while the highest is 5.40%. New employers can expect to pay 1.25% if they’re in a non-construction industry, or 5.40% if they’re in construction.

• Workers’ Compensation Insurance Tax — Nebraska employers have a couple of options for obtaining workers’ compensation insurance. They can go through a private insurer that’s licensed by the state (this includes the Nebraska Workers Compensation Insurance Plan), or they can get permission from the state to self-insure. The rate employers pay is based on the type of work their employees perform.

Industry Taxes

Nebraska taxes a few specific industries and services. Industry-specific taxes in Nebraska are below.

• Cigarette and Tobacco
• Admissions (Amusement, Entertainment, Recreation)
• Motor Fuels
• Freight or Delivery Charges
• Hotel Accommodations
• Satellite and Cable TV Installation
• Mobile Telecommunications Services
• Production, Assembly, Repair and Installation Labor
• Tangible Personal Property
• Telephone Services
• Utilities
• Warranties, Guarantees, and Maintenance Agreements
• Pest Control Services
• Building Cleaning and Maintenance
• Installation or Application of Tangible Personal Property
• Motor Vehicle Towing
• Motor Vehicle Washing and Waxing
• Motor Vehicle Painting
• Security Services
• Computer Software and Training
• Animal Specialty Services
• Detective Services
• RV Park Services
• Repair or Maintenance Services

Yes. Whether your Nebraska LLC was initially formed in the state or somewhere else, you’ll be expected to pay local and state taxes. So a Nebraska foreign LLC will have to pay taxes in Nebraska. Contact local government officials in the city or county where your business operates to find out more about what taxes you’ll need to pay at the state and local level.