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Thousands of Nebraska homeowners are closer to a tax bill than they may realize.
A new report from the National Association of Realtors® reveals that 16.9% of homeowners in the state have built up more home equity than the federal government allows to be excluded from capital gains tax. Another 2.3% have exceeded the $500,000 threshold used for joint filers—putting longtime owners squarely in the IRS’s sights.
The issue stems from outdated tax policy. Since 1997, homeowners have been able to exclude $250,000 in capital gains if single or $500,000 if married and filing jointly. But since then, home prices have risen more than 260% nationwide, far outpacing the caps.
In Nebraska, property values have climbed steadily—especially in urban areas like Omaha and Lincoln. That’s good news for wealth-building, but risky for those planning to sell. Nebraska taxes capital gains as income, with rates reaching up to 6.64%, adding to the federal hit.
Equity that comes with a price
Most Nebraskans don’t think of their home as a taxable asset. But for owners who’ve lived in their homes for decades, appreciation adds up. That’s where the home equity tax can quietly chip away at profits.
What was supposed to be a nest egg now feels more like a liability. Selling means unlocking that equity—but also triggering a tax event. For some, that’s enough to pause their moving plans altogether.
This leads to what economists call the “stay-put penalty.” Homeowners delay selling, even when it makes sense personally. And homes that could hit the market remain off-limits for younger buyers.
(Realtor.com)
Nebraska’s Exposure in Regional Context
While 16.9% may seem modest compared to states like Colorado or California, it’s significant in the Midwest. Nebraska sits above states like Iowa (9.8%) and Missouri (14.3%), and slightly below Minnesota (22.5%). And these figures are just the beginning.
As home prices continue to rise, more Nebraskans will be pushed over the line. Even moderate appreciation can make a difference. That’s especially true in high-demand school districts or neighborhoods seeing revitalization.
And for those nearing retirement? A capital gains tax bill can alter long-term financial planning. Even a five-figure hit can shift when—or if—someone decides to sell.
2035 Projections Raise the Stakes
Nationally, the picture becomes even more concerning. By 2035, nearly 70% of U.S. homeowners could exceed the $250K cap, and over 38% the $500K threshold. For Nebraska, that could mean thousands more owners facing an unexpected tax hit.
That’s why lawmakers are pushing the More Homes on the Market Act. The bill would double the exclusion and tie it to inflation going forward. It’s a fix many in the real estate industry say is long overdue.
Until that happens, homeowners should take a closer look at their financials. Understand your home equity and how much of it could be exposed to taxes. Because what you thought was yours might come with an IRS catch.
For Nebraskans with long-term equity growth, that means thinking twice—and planning ahead. The best time to know your tax position is before the “For Sale” sign goes up.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.