Nebraska residents filing state income tax in 2025 may qualify to deduct medical and dental expenses—but only the portion that exceeds 4% of their Nebraska-modified AGI. This is notably lower than the federal threshold of 7.5%, making state deductions more accessible to Nebraska taxpayers. In this detailed guide, we’ll explain how Nebraska’s rule works, what expenses qualify, how to report them, and why this can mean real tax savings.
📊 Nebraska vs. Federal Thresholds
Federally, the IRS allows medical expense deductions only for amounts exceeding 7.5% of AGI :contentReference[oaicite:0]{index=0}. Nebraska, however, adopts a more favorable approach by permitting deductions for expenses above just 4% of your modified state AGI :contentReference[oaicite:1]{index=1}. This lower threshold allows more of your medical costs to count toward deductions, even if they fall short of the federal limit.
✅ Qualifying Medical and Dental Expenses
Nebraska uses federal definitions (IRS Pub. 502) for qualifying expenses, including:
- Payments to doctors, dentists, hospitals, and practitioners
- Prescriptions, insulin, and medical supplies
- Medical equipment: wheelchairs, hearing aids, prosthetics
- Vision and dental care, including eyeglasses
- Insurance premiums (paid after tax)
- Transportation to medical care—mileage, tolls, parking
Be sure not to include any expenses reimbursed by insurance, HSA/FSA funds, or paid pre-tax :contentReference[oaicite:2]{index=2}.
🧾 Calculating Your Deduction
Here’s how to figure out your eligible deduction:
- Calculate your total unreimbursed, qualifying medical expenses for the tax year.
- Compute 4% of your Nebraska-modified AGI.
- Subtract the 4% threshold from your total expenses—only the excess is deductible.
Example: If your modified AGI is $50,000, 4% equals $2,000. If you spent $5,500 on qualifying medical care, you can deduct $3,500 on your Nebraska return.
📑 Reporting on Your Nebraska Return
Use the Nebraska Schedule I (Income Statement) to report medical expenses. Enter:
- Total qualifying medical expenses on line 10a
- 4% of your modified AGI on line 10b
- Deductible portion (difference) on line 10c
This amount reduces your Nebraska taxable income directly.
🛠 Why Nebraska’s Rule Benefits Taxpayers
- Lower threshold: More taxpayers qualify due to the 4% rule vs. federal 7.5%.
- Greater deductions: Even moderate medical spending can yield a state deduction.
- Planability: Since the threshold is low, even smaller medical costs may qualify.
- Complementary savings: You can claim Nebraska’s benefit regardless of federal deductions.
🧾 Documentation Tips
Keep thorough records to support your deduction:
- Invoices and receipts from medical providers
- Canceled checks and bank or credit card statements
- Insurance EOBs showing amounts you paid
- Mileage, toll, and parking logs for medical travel
These are necessary in case of state tax review or audit.
📅 Timing and Planning Strategies
- Bunch expenses: Combine treatments, dental work, or travel in one year to cross the 4% threshold.
- Include travel costs: Transportation adds valuable amount to medical expenses.
- Coordinate with federal filing: Even if you don’t qualify federally, Nebraska’s threshold might still apply.
🏁 Bottom Line
Nebraska’s 4% AGI threshold for medical deductions is a potent tax break. Unlike the federal 7.5% rule, Nebraska allows many more taxpayers to deduct medical costs—helping reduce state taxable income. By tracking your expenses, maintaining documentation, and accurately completing Schedule I, you can maximize this benefit. Planning your medical spending and travel strategically can boost deductions and lower your 2025 state tax bill.
