Income Tax Incentives for Land Conservation

Income Tax Incentives for Land Conservation

Conservation easements have been receiving increased press and scrutiny from the IRS, which is cracking down on easement donation abuse by tax shelter promoters.

At its very basis, conservation easements are meant to further the public good by encouraging taxpayers to donate property rights to organizations so the property can be conserved in its current form.

What is a conservation easement?

A conservation easement, also referred to as a conservation agreement, is a legal agreement between a landowner and a land trust or government agency.

When a landowner donates an easement to a land trust or public agency, he is giving away some rights associated with the underlying land. The easement acts to permanently limit the use of the land to protect its conservation values.

What kinds of property qualify?

It could be land that preserves open space or is deemed to be historically important. Land with a scenic vista, a critical water source or wildlife habitat may also qualify.

Does the landowner lose all rights to the property?

Conservation easements offer landowners the flexibility of protecting their land. A donating landowner can retain the right to harvest crops, while relinquishing rights to build additional structures on the conserved parcel.

It is the responsibility of the land trust to make sure the donating landowner adheres to the terms of the conservation easement.

What are the tax incentives?

If a conservation easement is voluntarily donated to a land trust or government agency it can qualify for a charitable tax deduction on the donor’s federal income tax return. To determine the value of the charitable donation, an appraisal is obtained for the value of the land “as-is,” and the value of the property as restricted by the easement. The difference between the two values is the amount of the charitable donation to the land trust.

Are there additional benefits?

The donating landowner may also realize savings in the form of reduced property taxes. A lowered property value assessment after the easement is granted can result in decreased real estate taxes. Additionally, some states, including New York offer their own tax incentives.

We’ve got your back

For additional information on the tax benefits of land conservation, please contact me at  [email protected] or (201) 655-7411.