Is An Easement Right For You?
What are some benefits of a conservation easement?
Tools like conservation easements can help preserve ranches by providing the landowners some level of economic stability while protecting open space, productive agricultural ground, critical fisheries and wildlife habitat from the impacts of development. Donated conservation easements can result in income and estate tax benefits, if the land qualifies under IRS criteria. See Potential Tax Benefits of a Conservation Easement.
How can LRLT help landowners?
- Identify potential sources of funds for conservation projects and easements
- Technical assistance in land conservation easements
- Stewardship and monitoring of conservation easements
What are the potential tax benefits?
The following examples are provided to show a general illustration of how the tax benefits work, and reflect Lemhi Regional Land Trust’s understanding of federal tax law as of October 2006. They are not provided to guide you in calculating your own benefits. Your personal tax outcome in any particular situation will depend of factors such as the value of your donation, your income, the extent of your other deductions, the availability of state and local tax deductions, and so on. To fully understand how current law affects your conservation plan, consult with an attorney, CPA or tax advisor.
Let’s say you own 250 acres of agricultural ground that borders the Lemhi River.
You work with Lemhi Regional Land Trust to craft an easement that allows agricultural uses and the construction of one additional residence, but prohibits subdivision and commercial development. The appraiser sets the fair market value of the property before the easement at $2,500,000 and the after (or restricted) value at $1,500,000. The charitable contribution value equals $1,000,000 ($2,500,000 – $1,500,000). The value of a conservation easement is always equal to the difference between the values of the property before the easement is in place, and after the easement is in place. A qualified appraiser must make this determination.
Before Easement Land Value:
$2,500,000
After Easement Land Value:
$1,500,000
Contribution Value:
$1,000,000
Landowner’s Adjusted Income:
$100,000
Federal Tax Savings
According to income tax regulations, you may deduct up to 50% of adjusted gross income each year for charitable contributions, and may carry over the deduction for up to a total of 16 years if necessary. In this example, you would be able to deduct $50,000 per year, or a total of $800,000 over 16 years. At a tax rate of 31%, this deduction translates to federal tax savings of $248,000 for the entire donation.