Donation: Tax Benefits

Donation of certain development rights to a qualified organization like River Fields can constitute a tax-deductible charitable gift. To be deductible, an easement must meet certain minimum conservation objectives established by the federal government. The value of the gift, determined through a qualified appraisal, is equal to the difference between the fair market value of the property before and after the easement is donated.

River Fields is currently working with other land trusts to pass Federal legislation increasing tax incentives for conservation easement donation. These incentives would raise the deduction a donor can take for a qualifying conservation easement from 30% of their adjusted gross income in any year to 50%, allow qualifying farmers and ranchers to deduct up to 100% of their income, and extend the carry-forward period for a donor to take tax deductions from 5 to 15 years.

State and federal inheritance taxes on unrestricted land are often so high that the heirs are forced to sell some or all of the land just to pay these taxes. Because an easement reduces the value of the property and therefore the value of the landowner’s estate, the inheritance taxes are also reduced. Thus, an easement may enable heirs to keep land they would otherwise have to sell.

When a landowner gives land to a family member, the gift is subject to federal gift taxes if its value exceeds the maximum tax-free amount. Lowering the value of the land through an easement may allow the owner to give more land in any one year without creating a gift tax, or it may help reduce the amount of tax owed.