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