By Sam O’Neill
Inheritance tax is a state tax that beneficiaries pay when they receive money or property from the estate of a deceased person. Inheritance tax is different from an “estate tax” because an estate tax is levied on the total value of a decedent’s estate and is paid by the estate before any distribution to beneficiaries is made.
Inheritance tax is calculated based on the beneficiary’s degree of kinship to the decedent and is generally paid out of the assets the beneficiary receives from the estate.
Nebraska inheritance tax applies to any estate where the decedent was a resident of Nebraska or to the estate of any non-resident decedent who owns real property in Nebraska at the time of their death.
Inheritance tax must be filed and paid to the county in which the decedent resided at the time of their death or in the county in which the non-resident decedent owned real estate.
Inheritance tax is due within twelve months of the decedent’s date of death. If the inheritance tax is paid after the twelve-month period has lapsed, there can be additional penalties and interest charged.
The amount of the inheritance tax a beneficiary pays is based on the degree of kinship between the decedent and the beneficiary. In Nebraska, spouses receive a full exemption and do not pay any inheritance tax.
What’s new?
Nebraska recently passed Legislative Bill 310 which changes the inheritance tax rate and exemptions beginning with deaths occurring in 2023 and after. The inheritance tax exemption provides for a certain amount of funds or assets that a beneficiary can receive without paying inheritance tax.
Any amount a beneficiary receives in excess of the exemption is subject to inheritance tax. Under Legislative Bill 310, the following tax rates and exemptions apply:
- Spouse – full exemption.
- Immediate family members (e.g., children, grandchildren, siblings, parents, etc.)
Tax Rate – 1%
Exemption – will be increased from $40,000 to $100,000 per beneficiary - Remote family members (e.g., aunts, uncles, nieces, and nephews)
Tax Rate – will be reduced from 13% to 11%
Exemption – will be increased from $15,000 to $40,000 per beneficiary - Transfers to unrelated persons
Tax Rate – will be reduced from 18% to 15%
Exemption – will be increased from $10,000 to $25,000 per beneficiary
As an example, a person dies in 2023 and leaves $150,000 to their child. The child will receive a $100,000 exemption. Therefore, the child would pay inheritance tax on the amount received above $100,000, which in this case is $50,000. The tax rate for an immediate family member is 1%. The total amount of inheritance tax the child would pay is $50,000 x 1% or $500.
There are other deductions that can be claimed that would further reduce the amount of inheritance tax. Some common deductions are funeral expenses and estate attorney’s fees.
The topic of a future article will be inheritance tax deductions.
If you have any questions regarding Nebraska inheritance tax, gaining the assistance of a probate attorney can be beneficial. Abrahams Kaslow & Cassman LLP has been assisting families with the probate process since 1944. Contact Sam O’Neill at [email protected] for more information.