Nebraska follows federal 1031 exchange rules with state income tax rates ranging from 2.46% to 5.84%, offering a stable real estate market with strong growth in Omaha and Lincoln.
This information is for educational purposes only and is not legal or tax advice. Consult with qualified professionals regarding your specific situation.
Important regulations and tax implications for your exchange
2.46% - 5.84%
Yes
$2.25 per $1,000 of value
Follows federal guidelines
No state-specific requirements
• Federal Form 8824 • Nebraska Form 1040N • Complete closing statements for both properties
None
Informational step-by-step guide for your 1031 exchange
Work with a qualified intermediary to handle the exchange funds and documentation. While Nebraska does not have state-specific QI requirements, choose one familiar with Nebraska's real estate practices and tax considerations.
Complete the sale of your relinquished property through your qualified intermediary. In Nebraska, closing processes typically take 30-45 days, and you'll need to pay the documentary stamp tax of $2.25 per $1,000 of property value.
Within 45 days of selling your relinquished property, identify potential replacement properties. In Nebraska, consider local economic factors, flood zones, and urban vs. rural considerations when identifying properties.
Conduct thorough due diligence on your identified replacement properties. In Nebraska, pay special attention to flood zone designations, particularly along the Missouri, Platte, and Elkhorn Rivers, as this can significantly impact insurance costs and property value.
Complete the purchase of your replacement property within 180 days of selling your relinquished property. Nebraska closing processes typically take 30-45 days, with potential seasonal variations.
Report your 1031 exchange on your federal tax return and Nebraska state tax return for the year of the exchange. Nebraska taxes capital gains at ordinary income rates ranging from 2.46% to 5.84%.
Report your 1031 exchange on Nebraska Form 1040N. While Nebraska follows federal 1031 exchange rules, you must still report the transaction on your state return even though the gain is deferred.
Be aware of Nebraska's flood zone designations, particularly along the Missouri, Platte, and Elkhorn Rivers. This can significantly impact insurance costs, financing options, and long-term property value, and should be factored into your investment decision.
Consider the significant differences between urban and rural property markets in Nebraska. Urban areas like Omaha and Lincoln offer stronger appreciation potential but lower cash flow, while rural areas may offer higher cash flow but limited appreciation and liquidity.
Recent changes and upcoming regulations affecting 1031 exchanges
Nebraska implemented scheduled reductions to its income tax rates, affecting the taxation of capital gains. The top rate decreased to 5.84% for the 2024 tax year, with further reductions planned for future years.
The Nebraska Department of Revenue issued Directive 22-4 to clarify the state's treatment of like-kind exchanges following federal tax law changes. The directive confirms that Nebraska follows federal rules for 1031 exchanges of real property.
Following federal tax law changes, Nebraska eliminated 1031 exchange treatment for personal property, limiting exchanges to real property only.
Plan and track your critical exchange deadlines
Enter the closing date of your relinquished property to calculate your 1031 exchange deadlines:
Investment property insights for Nebraska
Multifamily properties in Nebraska offer strong investment potential, particularly in Omaha and Lincoln, driven by population growth, limited housing supply, and strong rental demand.
Commercial and retail properties in Nebraska offer stable returns with moderate appreciation potential, particularly in growing urban areas and along major transportation corridors.
Agricultural land in Nebraska offers stable investment opportunities with strong cash flow potential, particularly for properties with water rights and productive soil.
Industrial properties in Nebraska show strong performance, particularly in Omaha, Lincoln, and along major transportation corridors, driven by e-commerce growth and logistics demand.
Real 1031 exchange examples from Nebraska
Current market conditions and future forecasts
Omaha leads Nebraska's real estate market with strong growth, ranking as a top hot housing market in 2025 with a 6.3% year-over-year price increase. The downtown revitalization, growing tech and financial sectors, and affordable housing compared to coastal markets have created strong demand in urban neighborhoods. The suburban markets, particularly in Sarpy County, also show strong performance.
Lincoln shows steady growth supported by the state government, University of Nebraska, and healthcare sectors. The market benefits from a stable employment base and strong rental demand from students and young professionals. The downtown and university-adjacent neighborhoods show particularly strong performance.
Grand Island and central Nebraska offer stable investment opportunities supported by agricultural, manufacturing, and healthcare sectors. The market is characterized by affordability and steady, modest growth, with strong cash flow potential for investors.
Western Nebraska markets show more modest growth compared to eastern Nebraska, but offer exceptional affordability and strong cash flow potential. The market is supported by agriculture, regional healthcare, and tourism to nearby attractions.
Long-term appreciation analysis in Nebraska
Understanding historical property appreciation patterns can help you identify areas with strong long-term growth potential for your 1031 exchange replacement property.
32.5%
54.8%
87.3%
Continued steady appreciation expected, with Omaha ranked as a top hot housing market in 2025, showing a 6.3% year-over-year price increase
28.7%
49.2%
82.6%
Steady appreciation projected, with Lincoln's strong employment base and university presence supporting continued demand
22.3%
38.5%
65.2%
Moderate appreciation expected, with stable growth supported by diverse economic sectors
18.6%
32.4%
54.7%
Modest appreciation expected, with slower growth than eastern Nebraska markets but offering strong cash flow potential
Current rental trends and opportunities in Nebraska
Understanding the rental market is crucial when selecting investment properties for your 1031 exchange. This analysis provides insights into current rental conditions across the state.
| Property Type | Avg. Rent | Vacancy Rate | Rent Trend | Cap Rate |
|---|---|---|---|---|
| Luxury Apartments | $1,200 - $1,600 (1BR) | 4.5% | up | 6.0% - 7.0% |
| Class B Apartments | $900 - $1,200 (1BR) | 3.8% | up | 7.0% - 8.0% |
| Single Family Homes | $1,300 - $1,800 (3BR) | 3.5% | up | 6.5% - 7.5% |
Omaha's rental market serves a diverse tenant base, including young professionals, healthcare workers, students, and families. The market has significant variation by neighborhood, with luxury rentals concentrated in downtown, Blackstone District, and select suburbs. Approximately 35% of renters are under 35, and 25% have household incomes above $60,000.
Omaha has relatively few rental regulations compared to many cities, creating a landlord-friendly environment. The city requires rental property registration and periodic inspections in some areas. Eviction processes are relatively straightforward and efficient compared to many states.
Omaha's rental market is expected to remain strong due to population growth, job creation, and urban revitalization. New construction is primarily focused on luxury properties in urban neighborhoods and select suburbs. Rent growth is projected to continue at a healthy pace, particularly in areas with good access to employment centers and amenities.
| Property Type | Avg. Rent | Vacancy Rate | Rent Trend | Cap Rate |
|---|---|---|---|---|
| Luxury Apartments | $1,100 - $1,500 (1BR) | 5.0% | stable | 6.2% - 7.2% |
| Class B Apartments | $850 - $1,100 (1BR) | 4.2% | up | 7.2% - 8.2% |
| Student Housing | $700 - $1,000 (per bedroom) | 3.0% | stable | 6.5% - 7.5% |
Lincoln's rental market is heavily influenced by the University of Nebraska-Lincoln, with students representing approximately 25% of renters. The market also serves state government employees, healthcare workers, and families. The university creates predictable seasonal demand patterns, with peak leasing activity in late spring and summer.
Lincoln has relatively few rental regulations compared to many university cities, creating a landlord-friendly environment. The city requires rental property registration in some areas. Eviction processes are relatively straightforward and efficient compared to many states.
Lincoln's rental market is expected to remain stable with pockets of growth, particularly in areas close to the university and downtown. New construction is limited, supporting rent growth in existing properties. Student housing remains a strong investment category, with predictable demand and relatively stable returns.
| Property Type | Avg. Rent | Vacancy Rate | Rent Trend | Cap Rate |
|---|---|---|---|---|
| Apartments | $700 - $1,000 (1BR) | 4.5% | stable | 7.5% - 9.0% |
| Single Family Homes | $900 - $1,300 (3BR) | 4.0% | stable | 7.0% - 8.5% |
| Duplexes/Fourplexes | $800 - $1,100 (per unit) | 3.8% | stable | 8.0% - 9.5% |
Smaller cities in Nebraska serve a mix of working families, healthcare workers, and local professionals. These markets have less demographic variation than larger cities, with a focus on workforce housing. Approximately 60% of renters are families, and 20% are seniors.
Smaller cities in Nebraska typically have minimal rental regulations, creating a very landlord-friendly environment. Eviction processes are straightforward and efficient. These markets often have strong community connections, making reputation management particularly important for landlords.
Rental markets in smaller Nebraska cities are expected to remain stable, with modest growth in select areas. Limited new construction supports rent stability in existing properties. These markets offer higher initial yields than Omaha and Lincoln, though with more modest appreciation potential.
Key mistakes to avoid in your 1031 exchange
Nebraska's property tax system can result in higher property tax burdens than expected, particularly for commercial properties, with effective rates often around 1.8% of assessed value.
Research property tax assessments before completing an exchange. Consult with local tax professionals familiar with Nebraska's property tax system. Budget for potentially higher property tax expenses in your cash flow projections. Consider properties in areas with more favorable property tax assessments.
Nebraska's location along major rivers creates significant flood risks in certain areas, which can impact insurance costs, financing options, and long-term property value.
Research flood zone designations before completing an exchange. Obtain flood insurance quotes to understand the cost impact. Consider properties in X zones (minimal flood risk) or properties with elevated foundations in higher-risk zones. Budget for flood insurance in your cash flow projections.
Nebraska has significant differences between urban and rural property markets, which can create challenges for investors accustomed to more homogeneous markets.
Thoroughly research local market conditions before acquiring properties in unfamiliar areas. Consider working with property managers who specialize in specific market types. Understand that rural properties may offer higher cash flow but limited appreciation and liquidity, while urban properties may offer stronger appreciation but lower initial returns.
Nebraska's real estate market has significant seasonal variations, with higher transaction volumes in spring and summer compared to winter months.
Plan exchange timelines with seasonal considerations in mind. Allow additional time for due diligence and closing during winter months. Consider scheduling property inspections during favorable weather conditions when possible. Work with local professionals familiar with seasonal market dynamics.
Common questions about Nebraska 1031 exchanges
Yes, Nebraska follows federal 1031 exchange rules without any additional state-specific requirements or modifications.
You need to file federal Form 8824 (Like-Kind Exchanges) with your federal tax return and report the exchange on Nebraska Form 1040N with your state tax return.
Nebraska taxes capital gains as ordinary income with rates ranging from 2.46% to 5.84% based on income level. The top rate is scheduled to decrease in future years.
Nebraska imposes a documentary stamp tax of $2.25 per $1,000 of property value on real estate transfers, though certain transactions may be exempt.
Out-of-state investors should be aware of Nebraska's property tax system, which can result in higher property tax burdens than expected. Additionally, Nebraska's income tax applies to all income sourced to the state, regardless of residency, which can create ongoing tax filing requirements even after completing an exchange.
Nebraska's location along major rivers creates significant flood risks in certain areas, which can impact insurance costs, financing options, and long-term property value. Investors should research flood zone designations before completing an exchange and budget for potential flood insurance costs.