The Inheritance Tax

On Jan. 1, the inheritance tax that Nebraskans pay was reduced from the highest category of 18% to 15% – but the actual final percentage one pays depends on the relationship to the deceased.

The closer the relative, the lower the rate. And 15% is the cap.

The Unicameral also increased the exemption amount from $10,000 to $25,000. Additional changes include anyone under 22 years old will not pay Nebraska’s inheritance tax at all.

Nebraska is one of only five states that still have a state inheritance tax. According to CEO Jim Vokal of the Platte Institute, “Forty-five other states don’t like it. It is a pretty destructive tax for Nebraska. Mainly for farmers and taxpayers across the state.”

Nebraska is the only state west of the Mississippi that still has an inheritance tax, and 45 states have phased out the tax.

In the upcoming Unicameral session, the Platte Institute will make a push for a full repeal of the Inheritance Tax.

Vokal said, “The senators are starting to read the tea leaves across the country. The opposition comes from the county officials who collect the money. Polling on this issue, I think, is 70% of Nebraskans on both sides of the aisle want this destructive tax gone.”

The inheritance tax is unreliable, especially in smaller counties, because no one knows who will pass away.

Vokal said, “It is not very reliable and not very consistent. But it is money that has typically been used, I don’t like to say it, what we call a slush fund, but that is what it is.”

The other argument used by officials is that property taxes will be raised if there is no inheritance tax. Vokal said, “Property taxes have been raised over the past decade; that argument falls on deaf ears.”

The inheritance tax is administered by the county court of the county where the deceased lived or where the real property is located.

The rate of tax and the exempt amount varies based on the degree of relationship of deceased and beneficiary. A 1% inheritance tax is imposed on immediate relatives, but remote relatives are subject to a 13% tax. A surviving spouse has no tax inheritance imposed.

Locally, according to Kimball County Treasurer Cindy Rahmig, the Kimball County Inheritance Fund has a balance of $1.5 million as of Jan. 3 after two recent transfers. The journal entries show that in November $250,000 was transferred from the Inheritance Fund to the General Fund, and in December $125,000 was transferred to the General Fund, then transferred to the Kimball County Transit Fund.

The Platte Institute’s mission “is to advance policies that remove barriers to growth and opportunity in Nebraska.”

The Platte Institute presents this position: “We envision a state where Nebraska has the freedom and opportunity to achieve their Good Life, Nebraska’s own version of the American Dream. Our policies will remove barriers so that: Nebraskans can keep more of what they earn; It’s easier to start and grow a business in Nebraska; and Nebraska can retain and attract a talented workforce.”

For more information on the inheritance tax, see Nebraska Revised Statue 77-2004.

In 2022, Nebraska was listed on the “Forbes: Where Not to Die” map along with about 17 other states.