Lawmakers consider proposal to end inheritance taxes in Nebraska

A constitutional amendment to end inheritance taxes in Nebraska was discussed in the Legislature’s Revenue Committee Wednesday afternoon.

Sen. Bob Hallstrom's LR13CA would prohibit the state and political subdivisions from levying an inheritance tax, if passed by the Legislature and approved by a majority of Nebraska voters.

Currently, inheritance taxes are collected at the county level at three different rates, depending on the nature of the beneficiary's relationship. Inheritances passed down to children, parents and siblings are taxed by counties at 1% after a $100,000 exemption. Nieces, nephews, aunts and uncles are taxed at 11% with a $40,000 exemption. Non-relatives pay 15% after a $25,000 exemption.

Nebraska is one of five states with inheritance taxes, and the only state where it is collected exclusively by counties. Iowa ended its inheritance tax at the beginning of 2025.

Hallstrom said ending the tax would make the state more competitive, particularly for retirees.

“We are trying to grow Nebraska and keep citizens here, but because of this tax they may choose to move to another state to avoid placing a tax burden on their loved ones after passing,” he said.

Jim Smith with the Platte Institute, a fiscally conservative think-tank, said hurts the tax hurts middle and working-class Nebraskans trying to build generational wealth.

"The inheritance a family member or friend leaves behind is often their last act of love and gratitude," he said. "So whether we call this an inheritance tax, death tax, or even a gratitude tax, this form of taxation is an outdated policy that no longer fits with the modern economic landscape, and that certainly no longer fits with Nebraska's values."

County Board members from both rural and urban parts of the state spoke about the importance of the tax for funding county services.

Wade Sluka, who serves on the Fillmore County Board of Supervisors, said the county was able to reduce property taxes by around $2 million dollars in the last five years thanks to the inheritance tax.

“Without this revenue source, property taxes go up or services will be cut. And this is not as a random threat by a county board member, threatening ‘Oh, we're going to raise property tax.’ That's not what I'm doing. It's just simply the truth,” he said.

Some members of the Revenue Committee encouraged counties to look at ways to cut spending to keep from raising taxes through other methods.

Also on Wednesday, Sen. Robert Clements designated separate inheritance tax legislation as his priority bill for the session.

His bill, LB468, would end the three tiered system of the inheritance tax and replace it with a rate of 1% after a $100,000 exemption for everyone. The bill also includes other tax increases to make up for lost revenue from the counties.

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