1031 Exchange in Nebraska
Nebraska conforms to federal Section 1031, so a properly structured like-kind exchange defers Nebraska income tax on the same timeline as federal tax. Nebraska has no separate clawback or add-back for deferred gain on out-of-state replacement property, and it does not impose a general nonresident withholding at closing. Nebraska does not tax capital gains at a special rate — gain is folded into ordinary income at the state's graduated rates, with a top rate of 4.55% for tax year 2026. Documentary stamp tax still applies on the deeds recorded in an exchange.
Fast Facts
- State Income Tax on Capital Gains
- Nebraska has no separate capital-gains rate. Gain is taxed as ordinary income at the state's graduated rates, with a top rate of 4.55% for tax year 2026 (down from 5.20% in 2025, scheduled to reach 3.99% in 2027).
- Conforms to Federal 1031
- Yes. Nebraska taxable income starts from federal adjusted gross income (Neb. Rev. Stat. 77-2716), so a valid federal like-kind exchange deferral is recognized for Nebraska tax on the same timeline.
- Clawback Rule
- No. Nebraska has no statute adding deferred gain back to state income when Nebraska property is exchanged into out-of-state replacement property. The gain is simply taxed if and when it is later recognized on a Nebraska return.
- Non-Resident Withholding
- Nebraska does not impose a general nonresident real estate withholding at closing, so there is no state closing-agent withholding to work around in an exchange.
- Documentary Stamp (Transfer) Tax
- Nebraska levies a documentary stamp tax on deeds of $2.32 per $1,000 of value (effective September 3, 2025; scheduled to rise to $3.32 per $1,000 on July 18, 2026). It applies to the taxable deeds recorded in an exchange.
Nebraska 1031 Exchange Rules and State Tax Treatment
Nebraska is a conformity state that keeps things relatively simple for 1031 investors. Nebraska computes individual income tax starting from federal adjusted gross income (FAGI) under Neb. Rev. Stat. 77-2716, then applies state-specific modifications. Because a federal Section 1031 deferral is already reflected in FAGI, the deferred gain does not appear in Nebraska income at the time of the exchange either. In practical terms, a properly structured exchange defers both the federal and the Nebraska tax on the same timeline.
Unlike Oregon, California, Montana, or Massachusetts, Nebraska does not have a clawback (add-back) statute for cross-state exchanges. If you exchange Nebraska investment property into replacement property in another state, Nebraska does not track that deferred gain and add it back to your Nebraska income later. The gain is taxed if and when it is recognized on a Nebraska return — for example, on a later taxable sale that Nebraska has jurisdiction to tax — but there is no special recapture mechanism triggered simply by exchanging out of state.
Nebraska also does not impose a general withholding on real estate sales by nonresidents. Many states require the title or escrow company to withhold a percentage of a nonresident seller’s proceeds at closing; Nebraska has no such general requirement, which removes a common friction point for out-of-state investors. That said, income sourced to Nebraska remains subject to Nebraska tax under the normal rules, so a nonresident who ultimately recognizes Nebraska-source gain should plan for the state’s ordinary-income treatment of that gain.
Legal and Tax Considerations
State Income Tax on Capital Gains
Taxed as ordinary income at Nebraska's graduated rates; top rate 4.55% for 2026. No separate capital-gains rate.
Conforms to Federal 1031
Yes. Nebraska starts from federal AGI (Neb. Rev. Stat. 77-2716), recognizing the federal deferral for state purposes.
Clawback
None. No add-back statute for deferred gain on out-of-state replacement property.
Documentary Stamp Tax
Applies to taxable deeds recorded in the exchange. $2.32 per $1,000 of value (scheduled to rise to $3.32 on July 18, 2026).
Required Documentation
- Federal Form 8824 (Like-Kind Exchanges) — filed with your federal return
- Nebraska Form 521 (Real Estate Transfer Statement) — filed with the Register of Deeds for each recorded deed, with any documentary stamp exemption number entered on the form
- Qualified Intermediary exchange agreement and assignment documents
- Complete closing/settlement statements for both the relinquished and replacement properties
Clawback Rule
None
Official References
- Nebraska DOR Directive 25-2 — Section 1031 Like-Kind Exchanges of Real Property (documentary stamp tax)
- Neb. Rev. Stat. 77-2715.03 — Individual income tax brackets and rates
- Neb. Rev. Stat. 77-2716 — Income tax; adjustments (federal AGI starting point)
- Nebraska DOR — Documentary Stamp Tax Rate History
- Nebraska DOR — Documentary Stamp Tax (Form 521 and exemptions)
Nebraska Tax Rate and Documentary Stamp Context
Nebraska does not apply a separate, preferential rate to capital gains, and it does not distinguish long-term from short-term gain the way federal law does. Gain from selling investment real estate is folded into ordinary Nebraska taxable income and taxed at the state’s graduated personal income tax rates. Under Neb. Rev. Stat. 77-2715.03, Nebraska’s top marginal rate is 4.55% for tax year 2026, down from 5.20% in 2025, and it is scheduled to fall again to 3.99% for tax year 2027 under the multi-year reduction enacted in LB 754. Because the rate is on a declining path, the timing of any recognized gain matters — deferring gain through a 1031 exchange can push eventual recognition into a lower-rate year, in addition to preserving capital for reinvestment.
On the transaction side, Nebraska’s main state-level closing cost tied to a deed is the documentary stamp tax, collected by the county Register of Deeds when a deed is recorded. The rate is $2.32 per $1,000 of value (or fraction thereof) for deeds recorded from September 3, 2025, and is scheduled to increase to $3.32 per $1,000 on July 18, 2026, per the Department of Revenue’s published rate history. In a 1031 exchange, the exchange itself does not exempt the transfers from this tax: a Department of Revenue directive (Directive 25-2, which supersedes 22-4) explains that a typical forward or deferred exchange does not change the Register of Deeds’ duty to collect documentary stamp tax on both the transfer of the relinquished property and the transfer of the replacement property. The one exception the directive describes is the “parked” transfer in a reverse exchange to or from an Accommodation Titleholder (AT/EAT), which can qualify for exemption when the required agent-language and Form 521 exemption are properly claimed — this prevents the safe-harbor “extra” transfer from being taxed.
Step-by-Step Process
- 1
Engage a Qualified Intermediary Before Closing
For a delayed exchange, set up a Qualified Intermediary (QI) before you close on the relinquished Nebraska property. You cannot take actual or constructive receipt of the sale proceeds — the QI holds the funds in escrow, consistent with the forward/deferred exchange structure described in Nebraska DOR Directive 25-2.
- 2
Sell the Relinquished Property
Close the sale with the QI receiving the proceeds. The deed transfer is reported to the county Register of Deeds on Nebraska Form 521, and documentary stamp tax is generally collected on the transfer. Report the disposition on federal Form 8824.
- 3
Identify Replacement Property Within 45 Days
You have 45 calendar days from the sale of the relinquished property to identify potential replacement property in writing, following the federal identification rules (such as the three-property rule or the 200% rule).
- 4
Close on Replacement Property Within 180 Days
You must acquire the replacement property within 180 calendar days of the sale (or your tax-return due date including extensions, if earlier). Only real property held for investment or business use qualifies under post-2017 federal law. A Form 521 is filed and documentary stamp tax is generally collected on the replacement deed as well.
- 5
Report the Exchange on Your Returns
Report the exchange on federal Form 8824. Because Nebraska starts from federal AGI and has no clawback or separate state exchange form, the federal deferral flows through to your Nebraska return without a special state add-back — the deferred gain is carried at its exchanged basis until later recognized.
Timeline Calculator
Enter the closing date of your relinquished property to calculate your 1031 exchange deadlines:
Frequently Asked Questions
Yes. Nebraska computes individual income tax starting from federal adjusted gross income under Neb. Rev. Stat. 77-2716, so a valid federal Section 1031 like-kind exchange deferral is recognized for Nebraska tax on the same timeline. A properly structured exchange defers both federal and Nebraska income tax on the qualifying gain.
No. Unlike states such as Oregon, California, or Montana, Nebraska has no clawback or add-back statute that recaptures deferred gain when you exchange Nebraska property into out-of-state replacement property. The deferred gain is taxed only if and when it is later recognized on a Nebraska return; there is no special recapture triggered by exchanging out of state.
Nebraska taxes capital gains as ordinary income at its graduated rates, with a top marginal rate of 4.55% for tax year 2026 (5.20% in 2025, scheduled to reach 3.99% in 2027 under Neb. Rev. Stat. 77-2715.03). There is no separate, lower capital-gains rate, so recognized gain — including boot in a partial exchange or gain from a failed exchange — is taxed at the applicable ordinary rate.
Yes. Nebraska levies a documentary stamp tax collected by the county Register of Deeds. The rate is $2.32 per $1,000 of value for deeds recorded from September 3, 2025, and is scheduled to increase to $3.32 per $1,000 on July 18, 2026. Per DOR Directive 25-2, a typical forward or deferred exchange does not exempt the transfers — documentary stamp tax is generally collected on both the relinquished and replacement deeds. A narrow exemption applies to the 'parked' transfer to or from an Accommodation Titleholder in a reverse exchange when properly claimed on Form 521.
Nebraska does not impose a general nonresident real estate withholding at closing, so there is typically no state closing-agent withholding to reclaim or work around in an exchange. Income sourced to Nebraska is still subject to Nebraska tax under the normal rules, so a nonresident who eventually recognizes Nebraska-source gain should plan for the state's ordinary-income treatment.
Related Guides
- What Is a 1031 Exchange? — the complete federal framework, deadlines, and rules
- 1031 Exchange by State — compare Nebraska with other states’ rules and clawback provisions
- Grand Island, NE
References
Official References
- Nebraska DOR Directive 25-2 — Section 1031 Like-Kind Exchanges of Real Property
- Neb. Rev. Stat. 77-2715.03 — Individual income tax brackets and rates
- Neb. Rev. Stat. 77-2716 — Income tax; adjustments
- Nebraska DOR — Documentary Stamp Tax Rate History
- Nebraska DOR — Documentary Stamp Tax (Form 521 and exemptions)
- IRS Form 8824 — Like-Kind Exchanges
This information is for educational purposes only and is not legal or tax advice. Consult with qualified professionals regarding your specific situation.