How to File LLC Taxes in Nebraska? (Step by Step Guide)
If you’re a Nebraska LLC owner, it is crucial to know and understand all the federal and state tax documentation to maintain conformity with the Nebraska Department of Revenue.
To help you understand the process of filing taxes, we teamed up with the best LLC advisors and attorneys with over twelve years of experience in the industry.
We reviewed the Nebraska Department of Taxation website over three weeks to obtain the correct tax information.
Quick Summary
- To file LLC taxes in Nebraska, you must classify the business structure and submit the correct tax forms to the IRS.
- A Nebraska LLC may choose the C-corp or S-corp tax status rather than the default one.
- Nebraska has a state sales tax rate of 5.50%, a maximum local sales tax rate of 2.0%, and a combined local and state sales tax rate of 6.95%.
- Based on my personal experience, all managers or members who profit from the LLC must pay self-employment tax.
How Are LLCs Taxed in Nebraska?
LLCs in Nebraska are taxed as a "pass-through" business by default, which means they do not pay federal taxes directly.
Instead, the LLC's revenue is passed through the business to you (and any other members). Your personal income is then taxed at the federal self-employment tax rate of 15.3% (2.9% for Medicare and 12.4% for Social Security).
Based on our professional experience, an LLC is also taxed based on its number of members. A single-member LLC is taxed as a sole proprietorship by default, but a multi-member LLC is taxed as a partnership.
The default choice, however, is not the sole tax option for your Nebraska LLC, as you can choose a C-corp or S-corp tax status.
State Taxes for Nebraska LLCs
Here's how different LLC structures affect state taxes in Nebraska.
1. Single-Member LLCs
The IRS considers all single-member LLCs in Nebraska to be disregarded entities for tax purposes.
This implies that the IRS does not anticipate the LLC filing its own federal income tax return.
Instead, the single-member LLC owners submit the form (and pay income taxes).
2. Multi-Member LLCs
In Nebraska, multi-member LLC is taxed similarly to a partnership.
The LLC must file a 1065 Partnership Return and provide the LLC owners with a Schedule K-1.
The K-1s show the distributive portion of profits for each owner. Furthermore, the K-1 income "flows through" to the owners.
Drawing from our experience, each owner then pays the Nebraska state income tax on their personal income tax return (Form 1040).
3. LLCs Taxed as S-Corp
Some LLCs may benefit from S-corp tax status by submitting Form 2553 to the IRS [1].
S-corps, like LLCs with default status, pay taxes as pass-through entities. This means that LLCs taxed as S-corps are exempt from paying corporate income tax.
"LLCs taxed as S-corporations can also make distributions to its members without indirectly imposing the 15.3% federal self-employment tax on those members."
- Delina Yasmeh, J.D./Tax LL.M, Distinguished Expert in Mergers & Acquisitions
4. LLCs Taxed as C-Corp
Your Nebraska LLC can decide to be treated as a C-corp, which means it will be taxed in the same manner as a corporation.
As a result, your LLC would be liable for federal and state corporate income taxes.
C-corps must file Form 1120 with the Internal Revenue Service and Form 1120-SN with the Nebraska Department of Revenue [2] [3].
Federal Taxes for Nebraska LLCs
Your Nebraska LLC has to pay the following Federal taxes:
1. Federal Self-Employment Tax
Drawing from personal experience, all managers or members who profit from the LLC must pay self-employment tax.
The Federal Insurance Contributions Act (FICA) administers this levy, which funds social security, Medicare, and other advantages.
The current rate of self-employment that our Venture Smarter LLC pays is 15.3%.
Learn how to avoid and reduce self-employment tax.
2. Federal Income Tax
You must also complete regular federal income taxes on your LLC's profits.
For our company our wages, current tax bracket, deductions, and filing status determine our Nebraska income tax liability.
Only our earnings from the firm are subject to federal income tax, minus certain deductions and exemptions.
This covers our tax-free allowance, company expenditures, and other deductions for healthcare and some retirement plans.
Other Taxes
The state of Nebraska imposes the following additional business taxes for your LLC:
1. Nebraska Sales Tax
Suppose you sell tangible goods (such as electronics, books, automobiles, appliances, furniture, raw materials, etc.) or services.
In that case, you may be required to collect and pay sales tax at the time of sale.
Nebraska's statewide sales tax rate is 5.5%. This rate may vary because local taxing jurisdictions, like cities and counties, can also levy extra sales tax.
2. Industry Taxes
Nebraska levies taxes on a few businesses and services. Some of Nebraska's industry-specific taxes are shown below.
- Repair or Maintenance Services
- Cigarette and Tobacco
- Motor Fuels
- Freight or Delivery Charges
- Mobile Telecommunications Services
- Production, Assembly, Repair, and Installation Labor
- Warranties, Guarantees, and Maintenance Agreements
- Motor Vehicle Towing
- Animal Specialty Services
3. Nebraska State Employer Taxes
Employers in Nebraska must pay unemployment insurance and workers' compensation taxes.
Unemployment Insurance (UI) Tax
Employers in Nebraska pay unemployment insurance taxes based on an experience rating ranging from 1 to 20.
The lowest conceivable rate is 0%, and the highest possible rate is 5.40%. New employers might anticipate to pay 1.25% in non-construction industries and 5.40% in construction [4].
Workers' Compensation Insurance Tax
Employers in Nebraska have a few alternatives for getting workers' compensation insurance.
They can use a private insurer licensed by the state (including the Nebraska Workers Compensation Insurance Plan) or self-insure with the state's approval.
Based on our experience, employers pay different rates depending on the type of job their workers do.
What Is Tax-Deductible for an LLC in Nebraska?
The tax-deductible for an LLC in Nebraska include real property tax credit, AQ land tax credit, and Nebraska property tax credit.
1. Real Property Tax Credit and AQ Land Tax Credit
The state of Nebraska provides tax relief to property owners by crediting them with a percentage of the real property taxes assessed yearly.
The Property Tax Credit Act (Act) establishes a real property tax credit based on the credit distribution valuation of each parcel of real estate in comparison to the credit allocation valuation of all real estate in the state.
2. Nebraska Property Tax Credit
Nebraska offers refundable credits for property taxes paid to school districts and community colleges.
Each credit is calculated by multiplying a certain percentage by the amount of community college or school district tax paid.
Related Articles:
- How to Create an LLC in Nebraska
- Top LLC Formation Services in Nebraska
- Looking Up an LLC in Nebraska
FAQs
How Much Is Business Tax in Nebraska?
Business tax in Nebraska is $5,580 plus 7.81% of any surplus over $100,000.
What Is the Self-Employment Tax in Nebraska?
The self-employment tax in Nebraska is 15.3%. Self-employed personnel in Nebraska complete this tax rate on their self-employment income.
What Is the Entity-Level Tax in Nebraska?
The entity-level tax is levied on the net income of the electing pass-through entity allocated or apportioned to Nebraska. The pass-through entity tax rate is equivalent to Nebraska's highest individual business income tax rate.
References:
- https://www.irs.gov/forms-pubs/about-form-2553
- https://www.irs.gov/forms-pubs/about-form-1120
- https://revenue.nebraska.gov/files/doc/tax-forms/2021/f_1120sn.pdf
- https://workforce.equifax.com/all-blogs/-/post/outlook-for-sui-tax-rates-in-2023-and-beyond
