Nebraska taxes property that is left by deceased Nebraska residents or by nonresidents who owned real estate (or other tangible property) in the state. The inheritance tax rate depends on how closely the person who inherits the property was related to the deceased person.
Inheritance Tax Exemptions and Rates
The surviving spouse is exempt from Nebraska’s inheritance tax, no matter how much he or she inherits. Many transfers to charitable, religious, or educational organizations are also not taxed if certain requirements are met, including that the property left to the organization is for use within Nebraska.
The law divides all other inheritors into groups, with the closest relatives paying the lowest tax rate.
Close relatives. Certain relatives of the deceased person are given a $40,000 exemption from the state inheritance tax. In other words, they don’t owe any tax at all unless they inherit more than $40,000. This tax exemption applies to these family members of the deceased person:
- children, grandchildren, and other lineal descendants (including legally adopted persons)
- any person to whom the deceased, for not less than ten years before death, stood in the acknowledged relation of a parent, or the spouse or surviving spouse of any such person
Inheritance tax is due if any of these people inherits more than $40,000. The tax rate is one percent of the clear market value of the property over the exempt amount.
More distant relatives. The second category of inheritors includes the deceased person’s:
- aunts, uncles, nieces, or nephews related by blood or legal adoption
- any lineal descendent of these persons, and
- the spouse of any of these persons.
The inheritance tax exemption amount for people in this category is $15,000. For amounts above that, the tax rate is 13%.
Others. Any person or organization that doesn’t fall within these categories owes inheritance tax on amounts over $10,000. The tax rate is 18%.
Property That Is Exempt From Tax
Certain kinds of assets are not subject to Nebraska inheritance tax, no matter who inherits them. Some kinds of tax-exempt property include:
- Money from the estate that immediate family members are entitled to, including the homestead allowance and family maintenance allowance
- Certain payments from employee benefits plans
- Insurance policy proceeds that go to a named beneficiary, not the estate.
Filing the Tax Return and Paying the Tax
It’s the responsibility of the executor of the estate (or if there is no will, the administrator named by the court), to file a Nebraska inheritance tax return if one is required. The executor generally collects the tax from the inheritors who owe it. Even if several inheritors owe tax, only one return is filed. Executors almost always need the advice of an experienced local attorney to file the return. It’s not always clear which property is taxable or what the tax rate is for a particular beneficiary.
Tax payments are made to the county treasurer and are due 12 months from the date of death. If payment is late, interest will be owed on the tax due, and the state may also assess a penalty.
For more information on Nebraska inheritance tax, check the Nebraska Department of Revenue website.