Nebraska Caregiver Tax Credit: How to Claim the LB937 Credit in 2026

Most family caregivers in Nebraska spend hundreds of hours each month helping a parent bathe, manage medications, and get to doctor's appointments — without a dollar of compensation. The state's caregiver tax credit, created by Legislative Bill 937, is one of the few tangible financial acknowledgments that unpaid caregiving has real economic value.

What LB937 Actually Provides

Nebraska became only the second state in the country to offer a dedicated nonrefundable income tax credit for unpaid family caregivers when LB937 took effect for tax years beginning on or after January 1, 2025. The credit equals 50% of eligible, uncompensated out-of-pocket caregiving expenses, capped at $2,000 per tax year. If the care recipient is a veteran or has a certified dementia diagnosis, the maximum credit increases to $3,000.

The word "nonrefundable" matters. If you owe $1,500 in Nebraska income tax and qualify for the full $2,000 credit, you'll reduce your tax bill to zero — but you won't receive the remaining $500 as a refund. Caregivers with little or no state tax liability won't benefit from the credit directly, which is worth understanding before building it into your financial planning.

Who Qualifies

The statutory requirements are specific. You must meet all of these:

• You're an unpaid family caregiver with eligible, uncompensated out-of-pocket expenses directly related to caregiving
• Your federal adjusted gross income (AGI) is less than $50,000 if you file single or less than $100,000 if you are married filing jointly
• The care recipient lives in a private residence, not a licensed assisted living facility, nursing home, or residential care home
• A licensed healthcare provider certifies that the care recipient requires assistance with at least two activities of daily living, such as dressing, feeding, toileting, or mobility
• You file a Nebraska state income tax return; because the credit is nonrefundable, you need Nebraska income tax liability to use it

The key clinical test is the licensed-provider certification that the care recipient needs help with at least two activities of daily living. The credit is not limited to one diagnosis.

How to Claim It: Form 3165

You'll claim the credit using Form 3165 (Nebraska Family Caregiver Tax Credit). A licensed healthcare provider must complete Form 3165C to certify the care recipient's need for assistance with at least two activities of daily living. The application requires:

• Your relationship to the care recipient
• The care recipient's name, date of birth, and Social Security number
• A description of the care you provide and the approximate hours per week
• Documentation of eligible, uncompensated out-of-pocket caregiving expenses

Attach the completed Form 3165 to your Nebraska individual income tax return (Form 1040N). If you use tax software, look for the Nebraska caregiver tax credit under state-specific credits — most major platforms have added it since the 2025 tax year.

Keep records of eligible out-of-pocket expenses and the Form 3165C certification in case the Nebraska Department of Revenue requests support. Follow the Department's current instructions for what to retain.

Can You Claim It Alongside Other Programs?

This is where it gets nuanced. The credit is based on eligible, uncompensated out-of-pocket caregiving expenses:

• Expenses paid by Medicaid, VA, or another program do not count as uncompensated
• Keep program-paid services separate from your own eligible out-of-pocket expenses
• Check current Nebraska Department of Revenue instructions before combining programs or claiming the same expense elsewhere

The Bigger Financial Picture

The $2,000 credit is meaningful, or up to $3,000 in qualifying cases, but it's one piece of a larger caregiving financial strategy. Nebraska's home care coordination system walks through how to consider the credit alongside Medicaid spend-down planning, the AD Waiver's respite care benefit, and the Lifespan Respite Program — all of which can reduce the financial burden of keeping a parent safely at home.

If you're providing 20+ hours of unpaid care per week, you should also explore whether your parent qualifies for the PAS program's consumer-directed option, which could pay you directly for the care you're already providing. Moving from unpaid care to paid PAS care changes the tax analysis, so check current Nebraska Department of Revenue rules before making that decision.

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