Nebraska Inheritance Tax

Nebraska's inheritance tax applies to the transfer of real estate and tangible personal property. The tax is determined by a court proceeding.

Nebraska is one of six states that imposes an inheritance tax upon the death of a resident or non-resident owner of real property within the state. Nebraska Inheritance Tax applies to transfers from a decedent to a beneficiary (excluding a surviving spouse) with the exception of gifts made three years prior to the decedent’s death that were not reported on an IRS Form 709. If not paid by the beneficiary within one year of the death of the person receiving the property, a hefty interest obligation accrues and the inheritance tax becomes a lien on any Nebraska real estate until paid.

Nebraska Inheritance Tax rate varies by class tier and exemption amount. Surviving spouses and charities are exempt from the tax. The tax is imposed on a percentage of the value of the property transferred to a beneficiary, with a maximum of 15%.

In 2020, Nebraska collected about $65 million in inheritance tax revenue. Douglas County collected the most, followed by Sherman County. Some people try to avoid Nebraska’s inheritance tax by transferring their property into a limited liability company before death. However, this strategy may not work for nonresidents if their home state also has an estate or inheritance tax. It may be beneficial for Nebraska residents to work with a financial advisor to develop an estate plan that can help them avoid the state’s inheritance tax.

Nebraska Inheritance Tax Update
Nebraska Inheritance Tax 1

Nebraska Inheritance Tax Update

Economic studies have found that inheritance taxes have harmful effects on family-centered wealth distribution policies and impose high compliance costs. As such, they should be eliminated. However, if eliminating the inheritance tax is politically impossible due to the need for local revenue sources other than property tax, then lawmakers should carefully consider this policy’s most harmful features and work to mitigate those features. For example, the current law provides no exemptions for life-long domestic partners, and taxing a transfer to a living partner is counterproductive to family-centered wealth distribution policies.

Inheritance taxes have not been adjusted for inflation over the years, leading to “bracket creep” that increases the tax burden on heirs. NACO supports a consolidation of the Class 3 and Class 2 brackets and reduction in the top inheritance tax rate to 10%. This would significantly reduce the overall tax burden in the state and eliminate the need for county appropriations from this source of revenue.

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