What are the federal tax benefits associated with a conservation easement?
See link below for state tax benefits
(Please note that the information below does not constitute tax advice, and that those who contemplate donating conservation easements should consult with their own tax advisors on how the relevant tax regulations apply to their individual situations.)
The federal income tax benefits for an individual landowner donating a conservation easement are similar to those of making other tax-deductible gifts of real property but are subject to some unique requirements. To meet the additional criteria for the tax deduction, an easement must be donated to a qualified organization for a qualified conservation purpose, such as:
1. The preservation of land areas for outdoor recreation by, or the education of, the general public,
2. The protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem,
3. The preservation of open space (including farmland and forest land) where such preservation is -
a. For the scenic enjoyment of the general public, or
b. Pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a significant public benefit, or
4. The preservation of an historically important land area or a certified historic structure.
An individual "donating" a qualified conservation interest may deduct the appraised value of the easement from their adjusted gross income, provided that the deduction does not exceed 30% of their adjusted gross income in the year of the gift. Any excess balance of the deduction may be carried over for up to five succeeding years, subject to the same annual 30% limitation. (IRC Section 170).
The appraised value of the easement is the difference between the value of the land with the easement and without the easement.
Estate Tax:
There are also significant estate tax benefits under IRC Section 2023(c) if either the decedent or the executor of an estate has donated a conservation easement with respect to land held by the estate.
What are the state tax benefits associated with a conservation easement? Click here