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New! Expanded federal tax incentive
for contributions of conservation easements

This expanded incentive MAY be extended into the future -- but for now, it is set to expire at the end of 2009. It applies only to conservation easement donations -- not donations of land (fee title) or partial land value (bargain sale).

Taxpayers can claim a federal income tax deduction when they donate permanent conservation easements to protect their lands.

Through 2009, this deduction has been expanded to provide:

• More opportunity for modest income donors to receive tax benefits when they donate conservation easements
• More incentive for farmers and ranchers to protect their working lands.

 

How much is the deduction increased?

Former deduction	New deduction
Deduct up to 30% of your income in a given year.	Deduct up to 50% of your income in a given year.
Carry forward the deduction up to 5 more years if you can't use it all in the donation year.	Carry forward the deduction up to 15 more years if you can't use it all in the donation year.
No special incentives for farmers or ranchers.	Qualifying farmers and ranchers can deduct up to 100% of income.

Example

Assume a landowner earning $50,000/year donates an easement worth $500,000.

The landowner can:

• Deduct $25,000 in the year of the donation, plus another 15 years, for a total $400,000 in deductions.
• If the donor is a qualified farmer or ranger, deduct $50,000 in the year of the donation, plus carry forward, for a total of a full $500,000 within 10 years.

How can you qualify?

• Permanently protect important conservation resources by working with a qualified conservation organization or agency.
• Meet all previous federal tax code requirements for conservation easement donations.
• Donate the easement before Dec. 31, 2009.

Who qualifies as a farmer or rancher?

• Receives more than 50% of his/her gross income from farming.
• The incentive also applies to farmers who are organized as C-corporations.
• The easements of farmers/ranchers who seek the special incentive must contain a restriction requiring that the land "remain available for agriculture."

Can I donate or bequeath the land later for conservation?

These incentives do not preclude you from donating the remainder of your rights at some future date. Such a second donation would be subject to the rules of an ordinary charitable donation, such as deducting a maximum 30% of income with a 5-year carryover.

However, if you use the special incentives as a "qualified farmer or rancher," remember that the land must remain "available to agriculture" and may not be suited for certain conservation purposes, such as a park.

Does the new tax incentive apply to C-corporations and S-corporations?

• Donations by S-corporations are passed through to their stockholders, and they, as individuals, will benefit from the new law as other individuals.
• If your C-corporation's gross income from farming is more than 50% of total gross income, and its stock is not publicly traded on a recognized exchange, it is treated as an individual and qualifies for the same incentives as a farmer.
• Other C-corporations have the same deductions and limits as before.

How can I claim the tax deduction?

• Use Schedule A to itemize your income tax deductions
• Use Federal From 8283 "Noncash Charitable contributions" to show how you calculated the value of your donation. (You'll attach this same form to your state tax return to claim your state itemized deduction and/or state tax credit.)
• You'll need a qualified appraisal to claim a deduction of more than $5,000. The appraisal date needs to be within 90 days before or after the date you sign your conservation easement.

See references to codes and rules for federal conservation easement tax incentives.

Read the most up-to-date information on this law from the Land Trust Alliance.

Read about other federal conservation-related tax incentives from the Land Trust Alliance.

 

More information on tax issues:
Income taxes | Capital gains taxes | Estate & inheritance taxes | Property taxes | Cautions

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This factsheet is provided for information only. Always consult your attorney or tax advisor for legal or professional advice for your situation.

This information released October 2008, Iowa Natural Heritage Foundation