1031 exchange in
Nebraska.

Does Nebraska follow federal 1031 rules?

Nebraska fully conforms to federal Section 1031 for real-property exchanges and has no clawback. Nebraska does require non-resident real estate withholding under Form 12N at a rate that effectively functions as an estimated tax payment on the gain; properly-structured 1031 exchanges qualify for exemption with timely Form 12N filing.

Nebraska capital gains tax structure

Nebraska imposes an income tax of 4.55% on capital gains in 2026 (down from 5.20% in 2025) under the LB 754 phase-down, with the rate scheduled to drop to 3.99% in 2027. There is no preferential long-term capital gains rate. Nebraska's property tax burden is among the highest in the country (effective property tax rate around 1.6-1.7% of market value statewide), which is the dominant ongoing tax cost rather than the income tax.

Nebraska's top income tax rate steps down annually under LB 754 (signed 2023): 5.20% for 2025, 4.55% for 2026, 3.99% for 2027 and forward. Capital gains are taxed as ordinary income with no preferential long-term rate and no inflation adjustment. The rate compression has been substantial — the top rate was 6.84% as recently as 2022 and will have fallen by more than 40% by the time the schedule completes. Capital gains are reported on Form 1040N for residents and Form 1040N with non-resident schedules for non-residents. Quarterly estimated payments are required when expected liability exceeds $500. Nebraska's property tax structure (high statewide millage offset by income tax credits under the LB 1107 / Property Tax Incentive Act) creates a meaningful gap between sticker property tax and net property tax for owner-occupants, but for investment property held in entities, the full sticker rate applies.

Federal tax treatment of a successful 1031 is deferral of capital gain and unrecaptured Section 1250 depreciation recapture (federally taxed at a maximum 25% when eventually recognized). Nebraska's state treatment sits on top of those federal rates.

Non-resident withholding in Nebraska

Nebraska requires Form 12N filing for non-resident sales of Nebraska real property — functioning as an estimated tax declaration tied to the seller's eventual non-resident return. For a properly-structured 1031 exchange, the non-resident seller files Form 12N at or before closing establishing that the gain is being deferred under Section 1031, and no withholding is required. Skipping the form means the closing agent may withhold against the gain or the seller may face estimated-tax penalties on the eventual non-resident return.

Common 1031 replacement strategies in Nebraska

Two markets that punch above their weight. Omaha is the financial capital of the central Plains — Berkshire Hathaway and Mutual of Omaha headquarters, Union Pacific HQ, plus a large insurance and FinTech cluster. Office demand in downtown Omaha has remained genuinely strong (vacancy below 10%, well below most US CBDs), driven by Fortune 500 anchors and a downtown reinvestment cycle including the new Mutual of Omaha tower, the streetcar line under construction, and the RiverFront park unification. Class B multifamily in Omaha (Old Market, Aksarben, Blackstone) trades 5.75-6.75%; small-bay industrial in the Sarpy County corridor 6.25-7.0%. Lincoln is steady but smaller — UNL, state government, regional healthcare. Agricultural land 1031 is the under-discussed Nebraska story: Sandhills cattle ranches, Platte River irrigated cropland, and feedlot-adjacent industrial trade actively, often inside family and regional networks rather than through broad institutional brokerage.

Top Nebraska CRE markets for 1031 buyers

Omaha

Financial capital of the central Plains. Berkshire Hathaway, Mutual of Omaha, Union Pacific HQ all anchor downtown office, and Omaha's CBD office vacancy has remained below 10% — one of the strongest CBD office stories in the US. Class B multifamily in the urban core (Old Market, Aksarben, Blackstone) trades 5.75-6.75%; small-bay industrial in the Sarpy County corridor (south of the city, near Offutt AFB) trades 6.25-7.0%. The downtown Mutual of Omaha tower, streetcar construction, and RiverFront park unification are reshaping submarket pricing into 2026-2027.

Lincoln

State capital plus University of Nebraska-Lincoln plus regional healthcare (Bryan Health, CHI). Class B multifamily trades 6.0-7.0%, NNN retail along O Street and 27th Street in the 6.25-7.25% range on national credit. Lincoln is a steadier and smaller market than Omaha — government-tenant office trades tighter (5.75-6.5%) and supply discipline has been better. Less institutional 1031 buyer depth than Omaha but reliable exit liquidity for the size.

Local counsel, recording, and filing in Nebraska

Nebraska title work is straightforward and most metro closings are title-company-handled with attorney involvement on larger deals or non-standard transfers. Recording is by county and Nebraska's documentary stamp tax ($2.25 per $1,000 of value) is modest. The non-trivial local issue is property tax appeal — Nebraska's high millage rates make annual valuation appeals a routine line item for institutional owners, and a Nebraska-licensed property tax consultant is a standard part of any meaningful 1031 acquisition team. For agricultural land 1031, retain counsel familiar with center-pivot irrigation rights, Natural Resources District (NRD) groundwater allocations, and federal farm-program eligibility transfer.

Recent developments in Nebraska

LB 754 (signed by Governor Pillen in 2023) is the headline Nebraska tax development of the decade. The bill phases the top individual income tax rate down from 6.84% (2022) to 3.99% by 2027 — a 42% rate reduction over five years. For 2026, the rate is 4.55%; for 2027 and forward, 3.99%. The corporate top rate is on a parallel schedule. The rate reductions are statutory and not subject to economic triggers (unlike some peer-state phase-downs), making them reliably modelable. LB 1107 (2020) created the Property Tax Incentive Act allowing income tax credits for property taxes paid — meaningful for Nebraska residents and small-business owners but generally inapplicable to investment property held in entities.

Common mistakes in Nebraska 1031 exchanges

• Underwriting to Nebraska sticker income tax instead of the LB 754 schedule. Nebraska's top rate was 5.20% in 2025, drops to 4.55% in 2026, and to 3.99% in 2027. Multi-year underwriting that uses 2024 or 2025 rates overstates Nebraska state tax cost by 25-40% by 2027. For any partial recognition planning across multiple tax years, model the actual rate in each year of recognition. The schedule is statutory and reliable, not subject to economic triggers.
• Ignoring property tax in NOI underwriting. Nebraska's effective property tax burden is among the top 10 nationally — statewide effective rate roughly 1.6-1.7% of market value. For investment property held in entities, the LB 1107 income tax credit for property taxes paid generally does not apply, so the full sticker millage flows to NOI. Annual valuation appeals are a routine line item for institutional owners; budget for a Nebraska-licensed property tax consultant and model 3-5% annual millage growth as a baseline assumption.
• Skipping Form 12N for non-resident 1031 sellers. Nebraska's Form 12N functions as an estimated-tax declaration for non-resident sellers of real property. For a properly-structured 1031 the form establishes that the gain is being deferred and no withholding is required, but skipping the filing can trigger withholding by the closing agent or estimated-tax penalties on the eventual return. File at or before closing, every time, even if no current Nebraska tax is due.

What to do if you're starting a Nebraska-source 1031

1. Engage a Qualified Intermediary before the downleg closes. Your QI cannot be a disqualified person (attorney, CPA, or real estate agent who has represented you in the last two years).
2. Confirm state conformance and any clawback or withholding filings with a Nebraska-licensed CPA.
3. Identify replacement property within 45 days in writing, delivered to your QI, under the Three-Property Rule or one of the alternative identification rules.
4. Close on replacement within 180 days of the downleg closing or by your federal tax-return due date (with extensions), whichever is earlier.
5. File Form 8824 with your federal return reporting the exchange. File any required Nebraska state forms for the year, including any clawback or withholding-exemption filings.

FAQ: 1031 exchanges in Nebraska

What is the Nebraska income tax rate for capital gains in 2026 and beyond?

Under LB 754 (signed 2023), the top individual income tax rate is 4.55% for 2026 and 3.99% for 2027 and forward. The 2025 rate was 5.20% and the 2022 rate was 6.84% — Nebraska is mid-way through a roughly 42% rate reduction. Capital gains are taxed as ordinary income at the applicable bracket rate with no preferential long-term treatment. Multi-year 1031 planning should model the actual rate for each year of recognition, not a 2024-2025 historical rate.

Does Nebraska require withholding on non-resident real estate sales?

Effectively yes, through Form 12N. Non-resident sellers of Nebraska real property file Form 12N at or before closing as an estimated-tax declaration. For a 1031 exchange the form establishes that the gain is being deferred under Section 1031 and no Nebraska tax is currently due, so no withholding is required. Skipping the form can trigger closing-agent withholding against the gain or estimated-tax penalties on the eventual non-resident return. File every time.

Why is Omaha office stronger than other US CBDs?

Genuine demand from Fortune 500 anchors that have not gone fully remote — Berkshire Hathaway, Mutual of Omaha, Union Pacific are headquartered downtown and continue to expand physical footprint. Combined with a growing FinTech and insurance ecosystem, downtown Omaha CBD office vacancy has remained below 10% — well below national averages of 18-22%. The new Mutual of Omaha headquarters tower, the 3-mile downtown streetcar line under construction, and the RiverFront park unification are creating additional submarket pricing differentiation. Omaha is a credible 1031 office play in a market where most US office is a deeply distressed asset class.

What is unique about agricultural land 1031 in Nebraska?

Nebraska is one of the largest agricultural-real-estate markets in the US — Sandhills cattle ranches (some over 100,000 acres), Platte River and central Nebraska irrigated cropland, and feedlot-adjacent industrial. Agricultural 1031 transactions are often handled inside family and regional networks rather than through institutional brokerage, with materially different liquidity and pricing dynamics than urban CRE. Center-pivot irrigation rights, Natural Resources District (NRD) groundwater allocations, federal farm-program eligibility, and CRP contract assignments all need to be handled in closing documents. Use a Nebraska real estate attorney with agricultural-land experience, not an Omaha or Lincoln urban generalist.

How does Nebraska's high property tax burden affect 1031 underwriting?

Nebraska's statewide effective property tax rate of roughly 1.6-1.7% of market value is among the top 10 in the country. For investment property held in entities, the LB 1107 income tax credit for property taxes paid does not generally apply (the credit is structured for resident individual taxpayers), so the full sticker millage flows to NOI. Always model property tax as a major line item — typically 15-25% of operating expenses for Nebraska commercial real estate, versus 8-12% for similar product in lower-property-tax states. Annual valuation appeals are routine; budget for a Nebraska-licensed property tax consultant on any meaningful 1031 acquisition.

Are the LB 754 rate reductions reliable or are they subject to revenue triggers?

Statutory and reliable. Unlike some peer-state phase-downs (Mississippi, Oklahoma) that condition future rate reductions on revenue triggers or Rainy Day Fund targets, the Nebraska LB 754 schedule sets the top rate at 4.55% for 2026 and 3.99% for 2027 and forward by statute. A future legislature could theoretically amend the schedule, but absent affirmative legislative action the rates are locked in. Model with confidence.