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Nebraska Step-Up in Basis
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Nebraska Step-Up in Basis

Nebraska step-up in basis: inherited property resets to date-of-death fair market value under IRC 1014, and the county inheritance tax is a separate bill.

By Settled Editorial

Inherited property in Nebraska takes a new cost basis equal to its fair market value on the day the owner died. That rule is federal, at Internal Revenue Code Section 1014(a), and it erases the capital gains tax on everything the asset gained during the owner's lifetime. Nebraska charges no estate tax on a modern death. It does charge an inheritance tax, collected by the county, and that is a separate bill from the one you meet when you sell.

Nebraska writes no basis rule of its own. What Nebraska adds is where the number gets recorded and who collects the other tax: a three-month inventory that asks for fair market value at the date of death, a shortcut affidavit that asks for the county assessor's figure instead, a county treasurer who collects an inheritance tax measured on "clear market value," and exactly one income tax subtraction that reaches gain on an inherited asset.

What the Step-Up Does, and Where the Rule Comes From

Basis is what the tax system treats as your cost in an asset. On a sale you pay capital gains tax on the price minus that basis. The step-up changes the starting number, and on a quarter section held since the 1970s that is the whole ballgame.

The problem it solves

Take a case. Your mother bought a house in Lincoln in 1998 for $92,000. At her death in 2026 it is worth $278,000. Had she deeded it to you during her life, you would take her $92,000 cost, called a carryover basis, and a sale at $278,000 would show a $186,000 gain.

Because you inherited it instead, your basis steps up to $278,000. Sell at $278,000 and the gain is zero. Sell two years later at $301,000 and you report $23,000 rather than $209,000. Those figures show the mechanism and are not a computation of anyone's tax.

The rule is federal, and it runs both ways

Internal Revenue Code Section 1014(a) gives property acquired from a decedent a basis equal to "the fair market value of the property at the date of the decedent's death," with three alternatives: the Section 2032 alternate valuation figure, the Section 2032A special-use figure for farm and closely held business real property, and the decedent's own basis to the extent of a Section 2031(c) conservation easement exclusion. Nebraska farm ground is one of the few places where that second alternative gets used, and it cuts against the heir.

The adjustment also runs down. An asset worth less at death than the owner paid resets to the lower figure, and the paper loss the owner could have claimed disappears with them. Holding a depreciated asset until death throws away a deduction a lifetime sale would have captured.

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The Nebraska Inheritance Tax Is a Different Measurement

Heirs mix these up constantly, so take them apart. Basis decides what you owe the IRS and the Nebraska Department of Revenue when you sell. The inheritance tax decides what you owe a county treasurer for receiving the property at all. The Nebraska inheritance tax guide works through the filing side, and the Nebraska estate tax page separates that county tax from the state estate tax Nebraska no longer levies. Three points belong here because they touch valuation.

The rate turns on who you are, not on what the estate is worth. For deaths on or after January 1, 2023, Neb. Rev. Stat. 77-2004 charges a parent, grandparent, sibling, child or other lineal descendant one percent of the clear market value received above $100,000. Neb. Rev. Stat. 77-2005 charges an aunt, uncle, niece, nephew or their descendants eleven percent above $40,000. Neb. Rev. Stat. 77-2006 charges everyone else fifteen percent above $25,000. Each exemption applies per beneficiary. A surviving spouse pays nothing under Section 77-2004(3), which also exempts the homestead allowance, exempt property and family maintenance allowance, and no beneficiary under twenty-two years of age pays anything under any of the three sections. Section 77-2004 was last amended by Laws 2026, LB838, section 25, operative July 18, 2026.

"Clear market value" is not your basis. Neb. Rev. Stat. 77-2018.04 subtracts funeral costs, administration expenses including attorney's fees and court costs, last-illness expenses incurred within six months of death, paid debts, and any attributable federal estate tax from the value subject to Nebraska inheritance tax. Section 1014(a) allows none of that. The figure the county judge determines and assesses under Neb. Rev. Stat. 77-2022 answers a different question, so do not copy it onto a later capital gains schedule.

The tax rides with the land until it is paid. Neb. Rev. Stat. 77-2003 sends the tax to the treasurer of the proper county, makes heirs, devisees, personal representatives and trustees liable for it, and makes it a lien on the real property "until paid or otherwise terminated pursuant to section 77-2037," with no lien on anything passing to the surviving spouse. Neb. Rev. Stat. 77-2037 is the section that ends it, and it names three finish lines, whichever comes first: ten years from the date of death, cut to five years after a court determination if the county court determined the amount inside that ten-year window; payment of the amount the county court finally determined; or a release or discharge under Neb. Rev. Stat. 77-2039. A buyer's title company will ask about that lien long before it asks about your basis.

Nebraska's own estate tax is not a live question. Neb. Rev. Stat. 77-2101.01 levies it only "for all decedents dying before January 1, 2007." Only the federal estate tax can reach a Nebraska estate today, and Internal Revenue Code Section 2010(c)(3)(A) sets the exclusion amount at $15,000,000, indexed for a decedent dying in a calendar year after 2026. Almost no Nebraska estate files that return.

Nebraska Income Tax Starts With the Federal Number

This is the part that makes the federal step-up land automatically on a Nebraska return.

Neb. Rev. Stat. 77-2714.01(1)(a) defines Nebraska adjusted gross income for a resident individual as "their federal adjusted gross income as modified in section 77-2716." The stepped-up basis has already been applied by the time the federal number arrives, so it carries into Nebraska with no second calculation. Nebraska offers no preferential rate for long-term gain. The bracket schedule at Neb. Rev. Stat. 77-2715.03 sets one set of rates by filing status and never uses the words capital gain, so gain on an inherited asset lands in the same schedule as wages.

Read the modification list at Section 77-2716 and one pair of subsections stands out for heirs. Subsection (26) subtracts from federal adjusted gross income any net capital gain from the sale or exchange of gold or silver bullion, for taxable years beginning on or after January 1, 2025. Subsection (25) adds back the matching net capital loss. Neither applies to bullion sold as a taxable distribution from a retirement plan account. Coin and bullion holdings turn up in Nebraska estates often enough that this is worth knowing before an heir sells one.

Read the cross-reference carefully. Subsections (25) and (26) point at the definition in Neb. Rev. Stat. 77-2704.66, which covers "coins, bars, ingots, notes, leaf, foil, film, or commemorative medallions of gold, silver, platinum, or palladium." The modification itself says gold or silver. Platinum and palladium sit inside the borrowed definition and outside the subtraction. Section 77-2716 was last amended by Laws 2026, LB998, section 1, so read the current text rather than a printed copy.

Nebraska's other capital gain break almost never reaches inherited property, and the exception is worth naming. Neb. Rev. Stat. 77-2715.09 lets a resident subtract the capital gain on the capital stock of one corporation, once in a lifetime, but only for stock the individual acquired on account of employment by that corporation or while employed there. Inheriting the stock does not qualify you. Subsection (2)(d) is the death provision: where the employee died without making the election, the surviving spouse, or the oldest surviving issue if there is no spouse, may make it for capital stock that would have qualified under subsection (2)(c), which covers stock the employee gave to a spouse or issue during life.

An out-of-state heir has one more line to find. Neb. Rev. Stat. 77-2733(2)(a) treats income from "the ownership or disposition of any interest in real or tangible personal property in this state" as Nebraska source income for a nonresident. Selling inherited Nebraska farm ground puts the gain on the Nebraska side of that line even when the heir lives in Colorado. Subsection (3) runs the other way for intangibles: gain on an inherited brokerage account is Nebraska source income only where the property was employed in a business carried on in this state.

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The Three-Month Inventory Is Where Nebraska Records the Number

The step-up is worth exactly as much as your proof of the figure, and Nebraska hands you a place to record it.

Neb. Rev. Stat. 30-2467 gives the personal representative three months after appointment to prepare and file an inventory of property the decedent owned at death, "listing it with reasonable detail and indicating as to each listed item its fair market value as of the date of the decedent's death and the type and amount of any encumbrance that may exist with reference to any item." The original goes to the court, and a copy goes to any interested person who asks. A special administrator, and a successor to a representative who already did this, are excused.

Neb. Rev. Stat. 30-2468 covers the appraisal. The personal representative "may employ a qualified and disinterested appraiser" for any asset whose value is subject to reasonable doubt, may hire different people for different asset classes, and puts each appraiser's name and address on the inventory beside the items that person valued. Nebraska makes this optional rather than automatic, which means an heir who expects to sell should ask for it early. Neb. Rev. Stat. 30-2469 requires a supplementary inventory when property turns up later or a listed value proves wrong.

Nebraska executor duties covers the rest of the job, and the Nebraska probate guide explains when a personal representative gets appointed at all. The Nebraska probate timeline shows where that three-month deadline sits against the creditor bar.

What to gather, by asset

  • Farm ground and pasture. A written appraisal as of the date of death from someone who values agricultural land for a living. Name that person on the inventory. Cash rent received after the death is income to whoever earned it and does not move the basis.
  • A house or town lot. A written appraisal as of the date of death. The county assessor's valuation notice is an ad valorem figure produced for property tax and is the weakest paper you can put in the file.
  • Listed stocks and bonds. The IRS Instructions for Form 706 give the rule: fair market value is the mean between the highest and lowest quoted selling prices on the valuation date, and where only closing prices exist, the mean of the closing price on the valuation date and on the trading day before. Most brokers produce a date-of-death valuation statement on request.
  • A farm corporation, partnership or limited liability company interest. A written valuation from a qualified appraiser. These entities also raise a Section 754 election question inside the entity.
  • Machinery, grain in the bin, livestock and collections. Get values dated to the death and photograph the items where the person who died left them. Bullion and coins deserve a receipt trail, because the Section 77-2716(26) subtraction depends on proving the gain.

Put the date in writing when you engage anyone. Ask for an opinion of fair market value as of the date of death, and ask that the date appear on the face of the report.

The Affidavit Route Records the Wrong Number

Here is the Nebraska trap almost nothing written for families mentions.

Neb. Rev. Stat. 30-24,129 lets a successor skip probate on real property. Thirty days after the death, the people claiming as successors file an affidavit with the register of deeds in the county where the land sits. Subdivision (a)(1) states the cap and, in the same sentence, the valuation method: the decedent's interest in all Nebraska real property must not exceed one hundred thousand dollars, and "the value of the decedent's interest shall be determined from the value of the property shown on the assessment rolls for the year in which the decedent died less real estate taxes and interest thereon if any is due at the time of death."

That is an assessed value. Section 1014(a)(1) asks for fair market value on the date of death. The two figures are produced by different people for different purposes and they routinely disagree. A family that records the affidavit, sells two years later, and reaches for the only dated number in the file has reached for the wrong one, and the direction of the error usually costs them: an assessed figure below market inflates the reported gain.

The personal property affidavit at Neb. Rev. Stat. 30-24,125 leaves an even thinner trail. It moves up to one hundred thousand dollars of personal property, stock and negotiable instruments on a sworn statement thirty days after the death, and it asks for no valuation date at all.

So when you use either affidavit, buy the appraisal anyway. Nobody will require it and the sale will demand it.

One more step belongs in that file. Neb. Rev. Stat. 77-2018.01 lets the inheritance tax be determined either inside a probate proceeding or in a proceeding brought for that purpose alone, and Neb. Rev. Stat. 77-2018.02 lets a family with no probate open an independent proceeding in the county court where the property sits. Subsection (4) is the useful part: where it appears no tax could be assessed, the court orders the county attorney to show cause, and on that showing the petitioner gets a determination that no inheritance tax is due and the potential lien is extinguished. That is how a clean title reaches closing. The Nebraska small estate routes walk through which affidavit fits which estate, and how to avoid probate in Nebraska covers the planning side.

Two Names on the Deed, and the Transfer on Death Deed

The deed decides how much of the property resets, and federal law splits the answer by who the owners are.

  • A married couple who are the only two joint tenants with right of survivorship. Internal Revenue Code Section 2040(b) calls that a qualified joint interest and includes one half of the value in the deceased spouse's gross estate whoever furnished the purchase money. One half steps up. The survivor's half keeps its original cost and carries a mixed basis into any later sale. Nebraska is a separate-property state. IRS Publication 551 names the nine community property states as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, and Nebraska is not on that list, so the full reset that Internal Revenue Code Section 1014(b)(6) hands a community property survivor does not reach a Nebraska couple.
  • Anyone else holding as joint tenants. Section 2040(a) applies the consideration-furnished rule. The gross estate includes the whole value except the part shown to have originally belonged to the other owner and never to have come from the decedent for less than adequate and full consideration. A child who contributed nothing toward farm ground held jointly with a parent sees the full value included in the parent's estate, and the full value becomes the basis.

Pull the recorded deed before you assume how the property passed. Neb. Rev. Stat. 76-2,109 matters when you do: there is no severance of an existing joint tenancy in Nebraska real estate when all the joint tenants sign an instrument about the property "unless the intention to effect a severance expressly appears in the instrument." A refinance or an easement the family signed years ago did not quietly turn a joint tenancy into a tenancy in common.

A Nebraska transfer on death deed sits on the taxpayer-friendly side of the line. Neb. Rev. Stat. 76-3414 says that during the transferor's life the deed does not affect any right of the owner, any interest of the beneficiary, or any creditor's rights, and creates no legal or equitable interest in the beneficiary. Neb. Rev. Stat. 76-3415 transfers the interest at death, contingent on the beneficiary surviving by one hundred twenty hours unless the deed sets a different survival period, and subject to every encumbrance the property carried at that moment. The owner kept everything until death, so the property sits in the gross estate and takes a date-of-death basis under Internal Revenue Code Section 1014(b)(9).

One item in Section 76-3414 carries an exception, and it matters before an aging parent signs. Section 76-3414 leaves public assistance eligibility alone "except to the extent provided in section 76-3421," and Neb. Rev. Stat. 76-3421 lets the Department of Health and Human Services require the transferor, the transferor's spouse, or both to revoke the deed so the transferor can qualify or stay qualified for Medicaid. So the deed protects the basis and does not protect the land from that request. Nebraska Medicaid estate recovery covers what the state can reach afterward.

Watch the lien on the way out. Neb. Rev. Stat. 76-3420(a) protects a purchaser or lender who buys from a transfer on death beneficiary against claims of the estate, the personal representative, the surviving spouse and creditors. Subsection (b) carves out one thing: that purchaser or lender "does not take title free of any lien for inheritance tax under section 77-2003." Clear the county before you list the property, or the buyer's title work will find it.

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What Does Not Step Up

  • Tax-deferred retirement accounts. Internal Revenue Code Section 1014(c) says the section "shall not apply to property which constitutes a right to receive an item of income in respect of a decedent under section 691." A traditional IRA, a 401(k), unpaid deferred compensation and similar items keep their character, and the beneficiary pays ordinary income tax on withdrawals.
  • Property the owner gave away during life. A completed lifetime gift carries the donor's basis forward. That is the trade against the step-up, and it is why deeding the home place to a child early so often costs a Nebraska family more than probate would have. Nebraska intestate succession shows what would have passed anyway.
  • Appreciated property gifted to the decedent within a year of death. Section 1014(e) blocks the round trip. Where appreciated property was given to the decedent during the one-year period ending on the date of death and comes back to the donor or the donor's spouse, the basis is the decedent's adjusted basis immediately before death.
  • Assets already outside the gross estate. Property in an irrevocable trust in which the decedent retained nothing takes no date-of-death basis, because nothing about the death brings it into the gross estate.

Farm Ground Meets Two Federal Rules Nebraska Families Should Know

Special-use valuation lowers the estate value and lowers the basis with it. Internal Revenue Code Section 2032A lets an executor value qualified farm real property at its farm use rather than its market value, capped by an inflation-adjusted aggregate reduction. Section 1014(a)(3) then makes that reduced figure the heir's basis. On an estate that owes no federal estate tax the election buys nothing and costs the family basis, so nobody should make it without running the sale side first.

Farm real property the heir farms is not a capital asset. Section 1221(a)(2) excludes from the definition of capital asset any depreciable property used in a trade or business and any real property used in a trade or business. An heir who inherits a quarter and rents it out as an investment holds a capital asset. An heir who inherits it and farms it is holding business property, which takes a different route through the return. Bring that question to a CPA before the first crop year, because it also decides how the step-up interacts with depreciation on the machinery and the buildings.

Selling, and Three Rules That Follow the Death

Basis only becomes a number when there is a sale, and selling the inherited property covers the transaction itself.

The holding period is automatic. Internal Revenue Code Section 1223(9) says a person whose basis in inherited property is determined under Section 1014, and who sells within one year of the death, "shall be considered to have held such property for more than 1 year." Long-term treatment does not depend on how fast the family moves.

The home-sale exclusion usually does not reach an heir. Section 121 excludes gain only where the seller owned and used the property as a principal residence for periods aggregating two years within the five years ending on the sale. An heir who never lived in the house does not qualify. Most of the time it does not matter, because the basis reset already removed the gain the exclusion would have covered.

The alternate valuation date almost never applies. Internal Revenue Code Section 2032 lets an executor value the gross estate six months after the death, and subsection (c) allows the election only where it decreases both the value of the gross estate and the sum of the estate tax and the generation-skipping transfer tax, after credits. With Nebraska's estate tax reaching no death after 2006 and the federal exclusion at $15,000,000, almost no Nebraska estate files a federal return, and no return means no election. Where a return is filed, Section 1014(f) ties the numbers together: basis cannot exceed the value finally determined for federal estate tax purposes, or the value reported on a Section 6035(a) statement.

What the spouse inherits before any of this starts is a separate question, and Nebraska surviving spouse rights answers it.

Frequently Asked Questions

Does the Nebraska inheritance tax change my basis?

No. They are two different measurements. Neb. Rev. Stat. 77-2004 taxes each beneficiary on the clear market value of what that person receives, and Neb. Rev. Stat. 77-2018.04 then subtracts funeral costs, administration expenses, last-illness expenses and paid debts from that value. Your basis under Internal Revenue Code Section 1014(a) is the property's fair market value on the date of death, with no deductions. Pay the county, then keep the appraisal for the sale.

How much is the Nebraska inheritance tax on what I inherit?

It depends on your relationship to the person who died. For deaths on or after January 1, 2023, Neb. Rev. Stat. 77-2004 charges a child, parent, grandparent, sibling or other lineal descendant one percent of the clear market value received above $100,000. Neb. Rev. Stat. 77-2005 charges an aunt, uncle, niece or nephew eleven percent above $40,000. Neb. Rev. Stat. 77-2006 charges everyone else fifteen percent above $25,000. A surviving spouse pays nothing, and neither does any beneficiary under twenty-two years of age.

Where does the date-of-death value get written down in a Nebraska estate?

In the inventory. Neb. Rev. Stat. 30-2467 gives the personal representative three months after appointment to file an inventory listing each item of the decedent's property with its fair market value as of the date of death, plus any encumbrance on it. Neb. Rev. Stat. 30-2468 lets the personal representative hire a qualified and disinterested appraiser for any asset whose value is open to reasonable doubt, and the appraiser's name and address go on the inventory beside the item.

We used the real property affidavit instead of probate. Is the value on it my basis?

No, and this catches Nebraska families every year. Neb. Rev. Stat. 30-24,129 caps that affidavit at $100,000 and tells you to take the figure from the county assessment rolls for the year of death, less unpaid real estate taxes. That is an assessed value produced for property tax. Internal Revenue Code Section 1014(a)(1) asks for fair market value on the date of death, which is a different number. Order a dated appraisal even though nobody makes you file one.

If my spouse and I own our Lincoln home together, does the whole house step up when one of us dies?

Usually only half. Nebraska is a separate-property state, so there is no double step-up here. Where a married couple are the only two joint tenants with right of survivorship, Internal Revenue Code Section 2040(b) puts one half of the value in the deceased spouse's gross estate whoever paid for it. One half steps up and the survivor's half keeps its original cost. Read the recorded deed before assuming anything, because Neb. Rev. Stat. 76-2,109 says joint tenants who sign an instrument together do not sever the joint tenancy unless the instrument says so.

Do inherited retirement accounts get a step-up in Nebraska?

No, and no Nebraska rule changes that. A traditional IRA, a 401(k) and similar tax-deferred accounts are income in respect of a decedent. Internal Revenue Code Section 1014(c) says the basis rule does not apply to property that constitutes a right to receive an item of income in respect of a decedent under section 691, so the beneficiary pays ordinary income tax on withdrawals with no reset. The step-up reaches capital assets such as a house, farm ground, a brokerage account or a coin collection.

Related Guides

This page describes Nebraska and federal law broadly rather than advising on one estate. Basis outcomes turn on dates, deeds and figures that change from family to family, so take yours to a CPA or a tax attorney, and confirm anything procedural with the county court clerk in the county where the person died.

Sources:

It is not legal advice.

Information current as of September 10, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Nebraska can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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