Nebraska Capital Gains Tax, Explained

Nebraska doesn't run a separate capital gains schedule the way the federal government does. A gain from selling stock, a rental, or a business is simply added to your other income and taxed under the same graduated brackets that apply to wages. There's no holding-period discount at the state level: a gain you held for ten years and a gain you held for ten days are taxed identically by Nebraska.

What has changed is the rate itself. Legislative Bill 754, signed in 2023, put Nebraska's top individual rate on a multi-year glide path down from what had been one of the higher rates in the region. The top rate was 6.64% before the phase-down began, fell to 5.20% for tax year 2025, and drops again to 4.55% for tax year 2026. Under current law it's scheduled to fall further, to 3.99%, for tax year 2027. For a large capital gain, that trajectory is worth watching closely: the same $150,000 gain that cost $7,800 in Nebraska tax at the old 5.20% rate costs $6,825 this year, and would cost roughly $5,985 if realized after the next scheduled cut takes effect.

Buried in Nebraska Revised Statute 77-2715.09 is a provision that shows up nowhere else in the states Taxstra covers: a one-time, lifetime election that lets an employee exclude Nebraska tax entirely on gain from selling stock in the company that employed them, plus certain large dividends on that stock. It's easy to mistake for a holding-period or years-of-service rule, since that's how most states structure employee stock breaks. Nebraska's version doesn't work that way at all.

Instead, the test runs through the corporation, not the employee's tenure or how long the shares were held. To qualify, the company that issued the stock must, as of the first sale or dividend under the election, have been actively doing business in Nebraska for at least three years, have at least five shareholders, and have no single shareholder or group of related shareholders holding more than 90% of the stock. Publicly traded companies automatically clear the shareholder tests. On the employee side, the stock has to have been acquired because of employment or while employed there, whether granted as compensation, purchased through a retirement plan, or bought on the open market while working there. There's no minimum number of years you had to hold the shares and no minimum years of service required, at least under the current form instructions and statute.

One nuance worth flagging: the statute's definition of "capital stock" explicitly excludes stock rights, stock warrants, stock options, and debt securities, and gains from exercising or selling an option itself never qualify. What can qualify are the actual shares you end up owning after exercising a compensation-related stock option, since Nebraska treats that exercise as acquiring the stock "on account of employment." Worked example: an early employee at a Nebraska-headquartered private company exercises options and later sells the resulting shares for a $150,000 gain. If the company clears the shareholder-count and ownership-concentration tests, and the employee has never used their lifetime election on a different company's stock, that entire $150,000 gain can be excluded from Nebraska income, a savings of roughly $6,825 at the current top rate. The gain is still fully taxable federally.

Nebraska's return builds from your federal adjusted gross income, so the federal system still does the heavy lifting on rate structure. A long-term capital gain is taxed federally at 0%, 15%, or 20% depending on your bracket, while short-term gains ride your ordinary federal rates up to 37%. The 3.8% net investment income tax layers on top above $200,000 MAGI for single filers or $250,000 for married filing jointly.

Put the two systems together and a high-income Nebraska seller's all-in rate on a long-term gain runs close to 23% to 24% (15% federal plus 3.8% NIIT plus 4.55% state) at the federal 15% bracket, and closer to 28% once the federal rate crosses into the 20% bracket. A short-term gain taxed at the top of both systems can run past 45% combined.

Because Nebraska piggybacks on the federal number, everything that shrinks the federal gain, loss harvesting, timing a sale into a lower-income year, an installment sale, or a 1031 exchange, reduces the Nebraska bill in the same motion with no separate state election required.

On the federal side, a rental sale splits into layers: the depreciation you claimed comes back as recapture at up to 25%, the remaining gain gets long-term rates, and the NIIT can apply on top. Nebraska doesn't separate any of that out. Recapture, appreciation, all of it lands in Nebraska taxable income and runs through the same graduated brackets as everything else, topping out at 4.55%.

Worked example: you sell a rental for a $200,000 total gain, of which $60,000 is depreciation recapture, and you land in the 15% federal long-term bracket. Federal: $60,000 x 25% = $15,000, plus $140,000 x 15% = $21,000, for $36,000. Nebraska: $200,000 x 4.55% = $9,100, no separate recapture treatment. Combined, before any NIIT: roughly $45,100.

The same 1031 exchange logic applies here as with any other Nebraska property sale: gain deferred federally generally stays out of Nebraska taxable income too, one decision covering both layers.

Agriculture is central to Nebraska's economy, and multi-generation farm and ranch sales are common. Unlike a state such as Wisconsin, which cuts its capital gains exclusion in half again for qualifying farm assets, Nebraska has no separate farmland or agricultural capital gains break. A farm sale is taxed exactly like any other Nebraska capital gain: ordinary income at the graduated brackets, topping out at 4.55%.

That makes federal planning carry more of the weight in a Nebraska farm transition. An installment sale spreading gain to a family successor over several years, or a properly structured 1031 exchange into replacement farmland, reduces both the federal and Nebraska bill together, since Nebraska simply follows whatever ends up in federal adjusted gross income.

And because Nebraska taxes the whole gain as ordinary income with no discount, a large one-time farm sale can also push the seller into estimated-payment territory at both the federal and Nebraska level for the quarter the sale closes, not just the following April.