School District Property Tax Credit FAQs

ADDED 06/16/2021: Can a pass-through entity claim the school district property tax credit?

With the recent enactment of LB 181, a pass-through entity may claim a credit for school district property tax it paid. For tax years beginning on and after January 1, 2021, the credit for the entity includes:

  • The credit computed on the school district property tax paid during the year covered by the return; and
  • For the 2021 tax year only, the credit computed on the school district property tax paid in 2020 if the pass-through entity did not allocate the school district property tax credit to its owners.

Different rules may apply to fiscal year and short-year returns.

I filed my Nebraska income tax return without claiming the credit for school district property tax I paid. How do I claim the credit?

What property tax years qualify for the school district property tax credit?

All school district property taxes paid after December 31, 2019 qualify for the credit. This includes school district property taxes imposed in any prior year that were paid after December 31, 2019.

I paid property tax levied for school bonds and property tax levied in excess of the levy limits. Do those property taxes qualify for the school district property tax credit?

No. The amount paid for those property taxes do not qualify for the credit.

I paid property taxes levied by a Learning Community. Do those property taxes qualify for the school district property tax credit?

Yes. The amount paid qualifies for the credit.

I paid property taxes levied by a Community College and Educational Service Unit (ESU). Do those property taxes qualify for the school district property tax credit?

No. The amount paid for those property taxes do not qualify for the credit.

How does a tax-exempt organization claim the school district property tax credit?

Tax-exempt corporations must file a Nebraska Corporation Income Tax Return, Form 1120N, and Form PTC. Tax-exempt trusts must file a Nebraska Fiduciary Income Tax Return, Form 1041N, and Form PTC.

My property tax statement includes a homestead exemption and the property tax credit. Do I need to reduce the school district property tax paid for the exemption and credit?

Yes. The school district property tax paid must be reduced by the portion of the homestead exemption and the credit. The Nebraska School District Property Tax Look-up Tool will perform the calculation automatically.

My property tax statement includes a line for property taxes paid for a redevelopment partly financed using TIF. Does this have any effect on the amount of the credit?

No, the school district property taxes used for the redevelopment project are eligible for the credit. The Nebraska School District Property Tax Look-up Tool will automatically compute the school district property tax paid on parcels with TIF.

If there is more than one owner listed on the property tax statement, who gets the credit?

Only the person or entity that paid the property tax to the county treasurer may receive the credit.

In a divorce situation, who gets the credit?

The individual that paid the property tax to the county treasurer may receive the credit. If payment was made from a joint bank or escrow account, then the credit may be split between the parties based on:

  • A divorce decree;
  • An agreement between the parties;
  • An even division; or
  • Any other method that fairly represents each party’s contribution to the payment.

If excess credits are claimed, both parties may be required to provide information to DOR supporting the credit they claimed.

Who gets the credit on a leased parcel?

The person or entity that paid the property tax to the county treasurer may claim the credit. If the lessee paid the county treasurer, the lessee may claim the credit. If the lessee’s payment to the lessor includes an amount for property tax and the lessor remits that amount to the county treasurer, the lessor may claim the credit.

If a pass-through entity paid the property tax to the county treasurer, the payment must be allocated to the pass-through owners in the same proportion as income.

Can a nonresident individual claim the school district property tax credit?

Yes. The nonresident must file a Nebraska Individual Income Tax Return, Form 1040N, and Form PTC. Those forms are required even if the nonresident would otherwise not have a Nebraska filing requirement.

Who gets the credit when a parcel is sold during the year?

The taxpayer that paid the property tax on the parcel may claim the credit. The property tax is paid when received by the county treasurer.

Example: A parcel is sold on May 1, 2020. The seller paid the following property taxes:

  • $1,203 of the 2019 property tax was paid to the county treasurer on April 1, 2020;
  • $1,203 of the 2019 property tax was paid at closing and remitted to the county treasurer in 2020; and
  • $798 of the 2020 property taxes was paid at closing (January 1, 2020 – May 1, 2020) and remitted to the county treasurer in 2021.

The buyer paid $1,605 of 2020 property tax to the county treasurer in 2021.

The seller paid all of the 2019 property taxes in 2020. The seller may claim a credit for all of the 2019 school district property taxes on their 2020 income tax return. The seller paid part of the 2020 property taxes in 2021. The seller may claim a credit for the related school district property taxes on their 2021 income tax return.

The buyer did not pay any 2019 property tax. The buyer cannot claim a credit for any 2019 school district property taxes. The buyer paid part of the 2020 property taxes, but they were not paid to the county treasurer until 2021. The buyer may claim a credit for the related school district property taxes on their 2021 income tax return.

How does the school district property tax paid and the credit flow through Form PTC and Schedule K‑1N?

A pass‑through entity will use Part D of Form PTC to allocate the school district property tax paid to its owners and the Schedule K‑1N to report the related school district property tax credit. The pass‑through entity will provide its owners with the information necessary to complete Part C or Part D of Form PTC as a supplement to Schedule K‑1N.

The owners will use Part A and Part C of Form PTC to compute the credit. Part C will be completed using the supplemental information provided by the pass‑through entity. The school district property tax credit shown on Schedule K‑1N will not be used to claim the credit.

Can a partnership reduce its withholding for nonresident individual partners by the amount of the school district property tax credit?

No. The amount remitted for nonresident individual partners cannot be offset by the school district property tax credit the partner may be able to claim. The partner must file a Nebraska Individual Income Tax Return, Form 1040N, and Form PTC to claim the withholding and school district property tax credit.

A parcel is owned by a disregarded LLC that paid the property tax. Who is required to complete a Form PTC?

The owner of the LLC will complete Part A and Part B of Form PTC. The LLC is not required to file a Nebraska income tax return or complete Form PTC.

A partnership paid property tax on several parcels. How is Part D completed?

Part D of Form PTC should include separate entries for each parcel and each partner. A partnership with two parcels and three partners will have six entries in Part D.

A partnership paid property tax on several parcels. What should the total percentage share of income or ownership be?

The total percentage share of income or ownership should be 100% for each parcel. If the partnership had three parcels, the ownership percentage for each parcel will be 100%, and the total at the bottom will be 300%.

Should the school district property tax credit be included in Nebraska taxable income?

The school district property tax credit will be included in Nebraska taxable income if it is included in federal adjusted gross income or federal taxable income. Please contact the IRS about the taxation of this credit.

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