Protect Your Nebraska Farm From Costly Gift Taxes

Last reviewed: November 30, 2025. Federal and state tax laws change frequently; always confirm current rules with your advisors.

Why Nebraska Farm Families Need to Think About Gift Taxes

Transferring a family farm is rarely just a business decision—it is about preserving land, legacy, and income for future generations. Many Nebraska farmers use lifetime gifts to move land, equipment, or ownership interests to children or grandchildren. While Nebraska does not currently impose its own separate state-level gift tax, federal gift tax rules still apply to farm transfers, including those by Nebraska residents.^[1]

Without a plan, seemingly simple steps—such as deeding a quarter section to a child or adding a child to a land title—can be treated as taxable gifts for federal purposes. Poorly structured gifts can:

• Reduce the amount that can pass free of federal transfer taxes
• Create unexpected federal gift tax filing obligations
• Complicate later estate planning, inheritance tax planning, or farm sales

With careful planning, you can often transfer significant value during your lifetime while managing or minimizing federal gift tax risk.

Nebraska Does Not Have a Separate State Gift Tax

From a state perspective, Nebraska farm owners have some good news: as of the date of this post, Nebraska does not have a separate state-level gift tax statute. Nebraska law instead imposes a county-administered inheritance tax on certain transfers at death; there is no additional Nebraska tax merely because you make a lifetime gift of farm ground, livestock, machinery, or other assets.^{[1] [2]}

However, the absence of a state gift tax does not mean gifts are consequence-free. In particular:

• Federal gift tax rules apply nationwide and can affect lifetime transfers of farm assets.^{[3] [4]}
• Lifetime gifts can affect how your estate is taxed at death for federal purposes.
• Certain patterns of gifting may interact with Nebraska inheritance tax planning, depending on how and when assets ultimately pass to heirs.

The lack of a Nebraska gift tax should be viewed as an opportunity to plan proactively, not a green light to transfer land without understanding the federal overlay and local inheritance tax rules.

How Federal Gift Tax Rules Affect Your Farm

Under federal law, you generally make a taxable gift when you transfer property and do not receive something of at least equal value in return. This applies whether you live in Nebraska or elsewhere in the United States.^[4]

Farm-related examples include:

• Deeding farm ground to a child for little or no payment
• Forgiving a child’s operating loan or land purchase contract
• Selling land or equipment to family members at below-market prices
• Transferring ownership interests in a farm corporation, LLC, or partnership

Key federal concepts that often impact Nebraska farmers include:

• Taxable gifts vs. excluded gifts. Certain transfers are completely exempt from federal gift tax, such as many direct payments of qualified medical or educational expenses made directly to providers, while others may be covered by the annual gift tax exclusion or may use part of your lifetime federal transfer-tax exemption.^{[4] [3]}
• Fair market value. The IRS usually evaluates gifts based on fair market value—what a willing buyer would pay a willing seller in an arm’s-length transaction. For farms, that can involve appraisals of land, water rights, buildings, and closely held business interests.
• Cumulative lifetime transfers. Federal rules look at the total value of your taxable gifts over your lifetime, not just in a single year, to determine whether federal transfer tax is due and how much of your exemption remains.^[3]

Because these rules are technical and periodically updated by Congress and the IRS, Nebraska farm families should review proposed gifts with experienced tax and estate planning counsel rather than relying on informal understandings or outdated rules.

Common Farm Gifting Mistakes in Nebraska

Nebraska farmers often want to keep things simple when transitioning assets to children. Unfortunately, attempts at simplicity can create long-term tax and legal problems. Examples include:

• Adding a child to the deed without a broader plan. Putting a child on the title to farm ground can be treated as a present gift of an ownership interest for federal tax purposes, depending on how the transfer is structured and documented. It may also complicate financing, leases, and later sales.^[4]
• Undocumented or undervalued family sales. Selling land, cattle, or machinery to family at a steep discount without documenting terms or valuation can look like a partially taxable gift.
• Uneven gifts among children. Gifting land or equipment to one child (especially an on-farm child) without balancing strategies for off-farm siblings can fuel conflict and challenges to your plan.
• Ignoring basis and capital gains. Gifting highly appreciated farm ground during life can forfeit potential income-tax advantages that might be available if heirs inherit at death, such as a potential step-up in basis under then-current federal law.
• No follow-through on tax filings. Some gifts require a federal gift tax return (Form 709), even if no tax is ultimately due. Failing to file when required can create problems for both you and your heirs, including uncertainty about how much of your lifetime exemption remains.^[3]

A thoughtful, written plan can often avoid these traps while still achieving your transition goals.

Structuring Farm Gifts to Manage Tax Exposure

There is no one-size-fits-all approach to farm gifting. Instead, your plan should be tailored to your land base, debt, cash flow needs, and family dynamics. Common tools include:

• Gifting over time. Spreading transfers over multiple years can help manage reporting and make better use of annual exclusions and other tax benefits under federal law.
• Using entities. Placing land, equipment, or livestock into a closely held corporation, limited liability company (LLC), or partnership and then gifting interests in that entity can provide:
  • Governance rules for decision-making
  • A clearer structure for on-farm and off-farm heirs
  • Potential valuation and succession-planning advantages when supported by proper appraisals and documentation
• Targeted gifts of income versus control. It may be possible to separate economic benefits (such as income distributions) from voting control, allowing you to transition value while preserving management authority during your lifetime or for a defined period.
• Coordinating with retirement and long-term care planning. Gifts should not jeopardize your own financial security or inadvertently impact eligibility for certain benefits. Planning should be coordinated with retirement income, long-term care, and health coverage strategies, and should account for possible nursing home or Medicaid considerations.

Because each family’s circumstances are different, any strategy should be reviewed with counsel and your tax advisors before implementation.

Valuing Nebraska Farm Gifts: Why Appraisals Matter

Accurate valuation is central to federal gift tax planning. For Nebraska farm assets, that often requires:

• Professional land appraisals. Independent appraisals can help establish fair market value for irrigated and dryland acres, pasture, and improvements. This supports federal gift tax reporting and can help defend valuations if the IRS ever questions them.
• Business valuations. If your farm operates as a corporation, LLC, or partnership, transferring shares or units usually requires a qualified business valuation that considers income, assets, liabilities, market conditions, and restrictions in governing documents.
• Equipment, grain, and livestock valuations. These operating assets also have value for gift tax purposes. Accurate inventory and valuation, especially around year-end, can be important if gifts involve machinery, stored grain, or breeding livestock.

Well-supported valuations help you:

• Determine whether particular gifts need to be reported on a federal gift tax return
• Track how much of your federal transfer-tax exemption may have been used
• Provide a paper trail for heirs, lenders, and future transactions

Involving valuation professionals early in the process can prevent unpleasant surprises later.

Coordinating Gifts With Your Estate and Inheritance Planning

Lifetime gifts should not be planned in isolation. For Nebraska farm owners, gifts often interact with several other elements of the overall plan:

• Wills and trust plans. Your will and any revocable or irrevocable trusts should reflect significant lifetime gifts, especially when you aim to treat children equitably while recognizing the contributions of an on-farm heir.
• Nebraska inheritance tax. Nebraska does not impose a separate state-level gift tax, but certain transfers at death can trigger Nebraska inheritance tax depending on the beneficiary’s relationship to the decedent. Strategic lifetime gifting may or may not align with your inheritance tax goals and county-level practice.^[1]
• Business succession agreements. Buy-sell agreements, operating agreements, and partnership agreements need to align with how and when you intend to gift ownership interests. Inconsistent documents can cause disputes or delay probate and administration.
• Powers of attorney. Your financial power of attorney should address whether and how an agent may continue or modify a gifting strategy if you become incapacitated. Clear authority can prevent confusion and potential conflict among family members.

A coordinated approach helps ensure that gifts you make today support, rather than undermine, your long-term objectives for the farm and your family.

When a Federal Gift Tax Return May Be Required

Certain farm-related gifts may require you to file a federal gift tax return (Form 709), even when no federal gift tax is ultimately due because of exclusions or available exemption.^[3] Examples can include:

• Gifts of land, mineral rights, or conservation easements
• Transfers of closely held business interests in a farm corporation, LLC, or partnership
• Forgiveness of family loans or contracts-for-deed
• Below-market sales of significant assets

Whether a particular gift triggers a filing requirement depends on several factors, including:

• The nature and fair market value of the property transferred
• Your overall pattern of lifetime gifting and prior use of exclusions
• How the transaction is structured and documented, including any promissory notes or contracts

The thresholds and technical rules for filing Form 709 are set under federal law and may be updated over time. Before assuming that no return is needed for a farm transfer, it is important to check current IRS guidance or consult your attorney or tax professional.^[3]

Planning Ahead: Practical Steps for Nebraska Farm Families

If you are considering gifting part of your Nebraska farm, or have already made informal transfers, you can take practical steps now to protect yourself and your family:

• Create a written transition plan. Identify who should ultimately own which tracts, equipment, and business interests, and on what approximate timeline.
• Inventory and organize records. Gather deeds, entity documents, prior tax returns, loan documents, and any prior gift-related filings so your advisory team has a clear picture.
• Review your titling. Confirm exactly how each parcel and asset is titled—individually, jointly, in a trust, or in an entity. Titling can significantly affect both tax treatment and succession.
• Engage professionals. Work with a Nebraska-focused estate planning attorney, your CPA, and, when needed, a qualified appraiser or valuation expert.
• Communicate with family. Clear explanations of your goals and your plan can reduce misunderstandings, resentment, and disputes later.

Advance planning generally gives you more options, more flexibility, and more time to adjust as laws and family circumstances change.

How Our Firm Helps Nebraska Farmers With Gift and Transfer Planning

Our firm works with Nebraska farm and ranch families to design transition plans that reflect both the economic realities of agriculture and the demands of federal transfer tax law. Depending on your needs, we can assist with:

• Evaluating proposed gifts of land, equipment, or business interests
• Designing entity structures (LLCs, corporations, and partnerships) for ownership and succession
• Coordinating federal gift and estate tax planning with Nebraska inheritance considerations
• Working alongside your accountant and appraisers to document valuations and prepare tax filings
• Drafting or updating wills, trusts, powers of attorney, and business agreements to reflect your gifting strategy

If you are thinking about deeding land to a child, selling assets on contract, or simply want to understand your options, you can contact our office to request a consultation. Thoughtful planning now can help preserve your Nebraska farm for the next generation while managing the risks of costly federal gift tax consequences.

Frequently Asked Questions

Does Nebraska have a state gift tax on farm transfers?

No. As of the last review date, Nebraska does not impose a separate state-level gift tax on transfers such as gifts of farm ground, livestock, or machinery. Nebraska does, however, have a county-administered inheritance tax that applies to certain transfers at death, which is a different tax and should be considered in your broader estate plan.

Do I need to file a federal gift tax return if no money changes hands?

You might. Federal gift tax rules focus on whether you transferred value without receiving equal value in return, not on whether cash was exchanged. If the value of the gift to a person in a given year exceeds the federal annual exclusion or involves certain types of property, a federal gift tax return (Form 709) may be required, even if no tax is ultimately due.

Is it better to gift land during life or leave it at death?

The answer depends on your tax situation, health, goals for control and management, and the needs of your heirs. Lifetime gifts may help with succession and management, while transfers at death may offer different income-tax treatment. Many Nebraska farm families use a combination of lifetime gifts and well-structured estate plans.

What professionals should be involved in planning Nebraska farm gifts?

Most families benefit from working with a Nebraska-focused estate planning attorney, a CPA or tax advisor experienced with agricultural operations, and, when needed, a qualified appraiser or business valuator. These professionals can coordinate to design and document a plan tailored to your farm.

How often should I review my farm gifting and estate plan?

It is generally wise to review your plan at least every few years, or sooner if there are major changes in tax law, land values, family circumstances, or your health. Significant gifts, purchases, or entity changes are also good times to revisit the plan.

Key References

[1] Nebraska Department of Revenue, Nebraska Inheritance Tax, explaining Nebraska’s county-administered inheritance tax regime and not listing any separate state gift tax.

[2] Tax Foundation, Does Your State Have an Estate or Inheritance Tax?, summarizing that Nebraska imposes an inheritance tax but no stand-alone state gift tax.

[3] Internal Revenue Service, About Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, describing when a federal gift tax return is required and how lifetime gifts interact with the federal exemption. Available at: https://www.irs.gov/forms-pubs/about-form-709.

[4] Internal Revenue Service, Frequently Asked Questions on Gift Taxes, explaining what constitutes a gift, annual exclusions, and common exceptions (including certain medical and educational payments). Available at: https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes.

Disclaimer: This blog post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading this material does not create an attorney–client relationship with our firm. Laws and regulations change, and their application can vary based on specific facts. You should consult with a qualified attorney or tax professional licensed in Nebraska before acting on any information contained here.