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LB 872

Eliminate an income reduction for extraordinary dividends and certain capital gains for income tax purposes

109th Legislature (2025-2026) Introduced by Danielle Conrad

Nebraska bill eliminates tax deduction for extraordinary dividends and certain capital gains, increasing state income tax on investment earnings.

Referred to Revenue Committee
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WeVote Research Nonpartisan
Bill Summary · LB 872

Legislative bill overview

LB 872 would eliminate an income tax reduction (deduction or exclusion) that currently applies to extraordinary dividends and certain capital gains in Nebraska. This means taxpayers would no longer be able to reduce their taxable income by the amount of these specific investment earnings, resulting in higher taxable income on these types of gains.

Why is this important

This change would increase state income tax liability for Nebraska residents and businesses that receive extraordinary dividends or qualifying capital gains. The revenue impact could be substantial depending on how many taxpayers benefit from this reduction and the size of their gains, potentially generating additional state revenue but also increasing taxes on investment income.

Potential points of contention

  • Impact on investors and retirees: Those relying on dividend and capital gains income—including retirees—would see higher tax bills, raising concerns about whether this disproportionately affects certain income groups
  • Competitiveness and retention: Critics may argue higher capital gains taxes could discourage investment in Nebraska or prompt wealthy residents to relocate to lower-tax states
  • Definition disputes: The term "extraordinary dividends" and which capital gains qualify may create ambiguity about which taxpayers are affected and whether the distinction is administratively clear

Compiled from official sources — confirm details with the bill’s official record.

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