Landowner Incentives-Tax Benefits

A donated easement may be treated as a charitable gift, making the value of the easement tax deductible. In order for the donation to qualify as a charitable gift, the easement must serve a valid “conservation purpose,” meaning that it must meet one of the following criteria:

  • The preservation of land areas for recreation or education by the general public;
  • The protection of a relatively natural habitat of fish, wildlife, plants, or similar ecosystem;
  • The protection of open space (including farmland or forest land); or,
  • The preservation of a historically important land area or certified historic structure.

This tax benefit can allow landowners to realize significant deductions in their federal income taxes. The monetary value of an easement donation is established through a “qualified” real estate appraisal of the property.  The value of the deduction equals the difference between the fair market value of the property without a conservation easement and the value of the property with an easement.

In tax years 2006-2013, a Federal tax incentive for conservation easement donations helped thousands of landowners to conserve their land and deduct a greater percentage than normal from their adjusted gross income (AGI). This enhancement or incentive expired on December 31, 2013.  The allowable deduction reverts to 30% of AGI for everyone in the year of donation with a five-year carry forward, compared to 50% of AGI under the federal tax incentive program. The Central PA Conservancy is a long-time member of the National Land Trust Alliance, the organization that supports advocacy on sound, federal conservation policy. Please refer to their website for information on their efforts to extend the enhanced incentive for conservation easement donation.

http://www.landtrustalliance.org/policy/tax-matters/campaigns/incentive-faqs

Estate Tax Benefits

Another important tax benefit is the reduction of estate taxes. Because taxes are based on the highest economic use of the parcel, these taxes can be substantial even if the land is being used as a farm or ranch. By granting away development rights through a conservation easement, the value of the land has decreased, which lowers the value of the land for estate taxes purposes, and can provide a significant reduction in the estate tax burden on family members.