tax credit vs. itemized deduction

Iowa landowners have potential for major tax savings when they protect their land!

Tax credits are generally much more valuable than tax deductions.

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. 
•Under pre-2008 rules, your donation reduces your taxable income from $90,000 to $40,000. 
•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 2009 tax year:

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

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