Benefits of a Conservation Easement:
A Key Benefit in undertaking a conservation easement on your land is the personal satisfaction legacy established from permanently preserving ecologically significant portions of the natural environment while maintaining the essential character of farm or undeveloped land for generations to come.
Other Benefits of a Conservation Easement:
Federal and State Income Tax Benefits:
• Under Treasury Regulations Section 1.170(h), a conservation easement is considered to be a charitable contribution. Its value is determined by qualified appraisal.
• A conservation easement deduction can offset up to 50% of an individual’s Adjusted Gross Income from all sources, or 10% of a C-corporation’s AGI, on both federal and state returns.
• Any excess deductions can be carried forward for up to an additional five years or until exhausted.
• A reinstatement of enhanced benefits is currently under consideration in Congress (see side bar).
State Tax Credits:
• Additionally, Georgia, North Carolina, South Carolina, Virginia, Colorado, New Mexico, California and several other states have created opportunities for income tax credits via conservation easements.
• The amount and requirements for these credits vary significantly by state.
• In several state these state tax credits maybe sold to others.
Estate Tax Benefits:
• The recognized value of the property is first reduced by the restriction of use place on the property.
• Second, in calculating estate taxes, IRS regulations allow an “exclusion” of a portion of the value of the land encumbered with a conservation easement of up to 40% of the remaining value, up to a limit of $500,000.
• Congress is considering raising this limit.
Reduced Property Taxes:
• Once a property is permanently preserved under a conservation easement, the property is typically classified in the lowest value classification for property tax assessment purposes.
• The value of nearby land that is not placed under restrictions is often enhanced by that land’s proximity to preserved land.
• The appraised estimate of the value of this enhancement may reduce the amount of the deductions that can be claimed.
• By partnering with those who can use the deductions and credits, an owner may be encouraged to preserve his lands even if he cannot personally use all of the tax benefits.
• Partners can receive an attractive return and feel good about facilitating the conservation of meaningful lands.
• Additional residual values may also be shared.