Military Tax Break for Nebraska

Nebraska offers a wonderful tax break opportunity for retired military members, and is one we commonly use with clients of our Omaha and Lincoln financial advisors.
Military retirees may be eligible to reduce Nebraska income taxes on their military retirement benefits by filing Form 1040N-MIL.
This tax break is available for retired military members who served active duty, in the National Guard, or as Reservists. For families where both spouses are military members, a Form 1040N-MIL must be filed for each military retiree. Also important to note, Form 1040N-MIL must be filed within two years after the date of separation.

How much can military retirees save on Nebraska taxes?

There are two available options:
  • Option 1: Allows the exclusion from Nebraska taxes of 40% of the military retirement benefit included in federal income. However, this tax break is only available for seven consecutive taxable years, beginning the year of the election; or
  • Option 2: Allows the exclusion from Nebraska tax of 15% of the military retirement benefit included in federal income for all taxable years, beginning with the year in which the retired service member turns 67 years of age.

Making the election

Because Nebraska does not allow changes to the 1040N-MIL, a mistake in making the election could be costly. Above all, filing the tax break election within the two year period is essential. Once the two year period after the date of separation has passed, no election is available.
Consequently, careful planning is required to choose the best option for your retirement situation.
For example, if you are planning to move to another state later in retirement, option 2 might not be advantageous. On the other hand, a separated service member who will not be receiving military retirement benefits until a later date might not see any benefits using option 1.
The timing of the election along with your other factors of retirement income tax timing (consider the tax brackets you might face as the combination of things like Social Security, this pension, required IRA withdrawals, among other factors) along with the date at which the military retirement benefits will begin are factors to consider in optimizing and obtaining this benefit.

An Odysseus Agreement To Earn Buffett-Like Returns

In the Greek poem, The Odyssey, Homer illustrates an age old flaw in human nature. Odysseus, the hero, is warned by goddess Circe that when his ship is sailing by the island of the Sirens, the irresistible songs of the Sirens will lure him towards the island and destroy his ship.

The sirens are symbolic of the flaws and biases that seem to be a natural part of our brain’s chemistry. Homer suggests a solution to keep these flaws in check. To counter the allure of the Sirens, Odysseus orders his crew to tie him to the mast of the ship and to ignore his future pleas for release until they have passed the dangerous islands. Odysseus commits himself to a rational course of action at a neutral time to ensure that he does not get swayed by emotions during the time of distress. Read the rest of this entry »

The Benefits Of Budgeting

When it comes to personal finance there is one word that makes almost everyone cringe… Budgeting. Most people feel that maintaining a budget means that it will be the end of all of the “fun”. In reality, establishing and following a sound budget does just the opposite. It not only allows you to control your spending, but also is the foundation to achieve the financial goals you truly desire.

Here at Callahan Financial Planning we simply define a budget as providing for your needs within scarcity, which is the limited amount of money available to you. This means living within the amount of money you earn while taking care of your needs. The goal of having a budget isn’t to restrict your spending, but to cover all your necessities and focus any remaining money on what is most important to you. Budgeting forces you to take an in depth look at where your money is currently going and decide if that’s where it should go in order to accomplish your true goals. Read the rest of this entry »

Do I Need Financial Planning?

Have you been thinking about creating a financial plan for yourself, but just don’t know if you actually need to take the time to do it? If you’re teetering on the idea, ask yourself the following questions:

  • Are you unclear about how your current investments are performing?
  • Do you and your spouse differ over how to handle your money?
  • Are you confused about the vast array of investment options?
  • Do you feel you pay too much in taxes?
  • Are you uncertain if you have the right kinds and amounts of insurance?
  • Have you delayed creating an estate plan?
  • Are you worried about not having enough money to retire?

If you answered ‘yes’ to any of the following questions, there’s a good chance you should consider financial planning. Read the rest of this entry »

More About Callahan Financial Planning

Who are we?Callahan Financial Planning logo

Callahan Financial Planning is a new, independent financial planning company based in Omaha, NE with a better way to pay for and receive finance advice. Aware of the conflict traditional sales staff and commissions produced, we set out to build a financial planning model to create, implement and manage financial plans to your goals… free from financial product sales. Read the rest of this entry »