What are the financial and tax benefits of donating a conservation easement?

Author: Jessica | 12/19/18

Federal Income Tax Benefits—Under the Internal Revenue Service (IRS) code, the donation of a qualified conservation easement may be treated as a charitable contribution. The IRS allows a deduction if the conservation easement is perpetual and donated “exclusively for conservation purposes.” Currently, the value of the contribution can be deducted at an amount up to 50 percent of the donor’s adjusted gross income in the year of the gift. If the easement’s value exceeds 50 percent of the donor’s income, the excess may be carried forward and deducted (again, subject to the 50 percent limit) over the next 15 years. (Currently, this benefit is good through December 31, 2013)

Estate Tax Benefits—Donation of conservation easements, whether during a landowner’s life or by bequest, can reduce the value of the land on which estate taxes are calculated. This can greatly benefit the landowner wishing to transfer land to relatives. The estate tax benefits of a conservation easement often can mean the difference between heirs having to sell property to pay estate taxes or being able to keep the property in the family. The 1997 Taxpayer Relief Act (IRC Section 2031(c)), provides an additional exclusion of up to $500,000 from estate tax for land subject to a qualifying conservation easement. It also allows heirs to donate an easement after the death of the descendent, but before the estate tax return is filed.

Property Tax Benefits—Conveyance of a conservation easement may reduce a landowner’s property taxes. Under Washington law, county assessors must take a conservation easement into consideration in establishing the market value of the land subject to the easement. However, this depends on current zoning and land use, current assessed value, and whether the owner participates in a current-use assessment program, like designated forest land or agricultural open space. The exact terms of each individual easement also have a bearing on property taxes.


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