Nebraska is one of just five states still collecting an inheritance tax, and a new report from the Platte Institute argues it's time to scrap the more than century-old levy. The tax forces families, farms, and small businesses to pay the state simply for transferring assets from one generation to the next. The report concludes that Nebraska should join the 45 states that have already figured out how to operate without taxing inheritances.
The tax, which dates to 1901, applies rates and thresholds that vary widely by relationship. Immediate family members including children, parents, siblings, and grandparents face a 1 percent tax on inheritances above $100,000. Aunts, uncles, nieces, nephews, and certain other relatives pay an 11 percent tax on amounts exceeding $40,000. Other beneficiaries can be hit with a 15 percent tax on inheritances over just $25,000. The tax brought in $101.5 million in fiscal year 2026, with over 60 percent coming from the class that includes children and other close family members. Collections can swing wildly from year to year: 73 of Nebraska's 93 counties saw their inheritance tax revenue change by at least 50 percent over the past two years. Polk County collected roughly $845,000 in fiscal 2024, jumped to nearly $3 million in 2025, then fell to just $584,000 one year later. Greeley County pulled in $3.63 million in fiscal 2024 before dropping to $427,000 the next year and $304,000 in fiscal 2026.
The report notes that Nebraska is one of only two states, alongside Pennsylvania, to impose an inheritance tax on immediate family members. The low exemption thresholds create particular problems for family farms and small businesses, according to the report. Unlike inheritances made up primarily of cash, families inheriting farms or businesses may receive valuable assets without the liquid cash needed to cover the tax bill. Beneficiaries may be forced to borrow money, sell other assets, or sell part of the inherited farm or business to pay the tax.
The report explains that the inheritance tax can encourage taxpayers to change where they live and invest. It cites research finding that when a typical wealthy retiree relocates five years before death to avoid estate or inheritance taxes, a state could lose $1.73 in other tax revenue for every $1 eventually collected through the tax. Nebraska's inheritance tax also puts the state at a competitive disadvantage, the report argues. Every state bordering Nebraska operates without an inheritance tax, and Nebraska is the only state west of the Mississippi River that still imposes one. The report points out that Nebraska has already taken significant steps in recent years to make its tax code more competitive, including lowering income tax rates and eliminating the state tax on Social Security benefits.
The report frames the inheritance tax as an outdated holdover that continues to tax family savings, farms, and businesses when they're passed to the next generation. Forty-five states have figured out how to operate without an inheritance tax. Nebraska should become the next.