Tax credit vs. itemized deduction

With Iowa's new tax credit, passed in 2008, landowners stand to reap major tax savings when they protect their land!

A tax credit
is subtracted directly from the tax you owe - dollar for dollar.

An itemized donation
reduces the amount of income on which your tax is calculated. Its value depends upon your income tax bracket.

Compare the difference on a donation of land or easement valued at $50,000
New Iowa tax credit	Former itemized deduction
Your income tax bracket doesn't matter with credits — only your final tax bill.	With deductions, your income tax bracket matters. So let's assume that you have $90,000 in income, which is in the 8.98% tax bracket.
If you calculate that you owe $8,000 in state taxes, and your tax credit amount is $25,000 (half of donation value), then you would pay $0 state taxes this year. You'd carry forward $17,000 in state tax credits to subtract from your state tax liability in the coming year -- and for 20 years total or until you've used up the entire credit.	When you deduct a land donation valued at $50,000, you can calculate your taxes on just $40,000 in income.
You'd realize a total tax savings of $25,000.	Your total tax savings would be $4,500.

For more information

Related links on the Iowa income tax credit for contributions of conservation land, effective for the 2008 tax year:

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