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.
