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Iowa tax credit for charitable
conservation contribution of land

Thanks to new legislation passed in 2008, Iowa taxpayers can now claim a substantial Iowa tax credit when they make a charitable donation to a qualified conservation organization:

Land for conservation purposes (full value or bargain sale)
Conservation easements.

Iowa's new tax credit provides so much value that full or partial donations for conservation purposes can, in some cases, bring landowners nearly as much financial return as selling the land.

How much credit can I receive?

• 50% of the fair market value of the donated property interest
• Maxiumum tax credit of $100,000

In other words, if you donate land or easements valued at $200,000, you can subtract $100,000 from your Iowa income tax payment.

Tax credit vs itemized deduction Tax credits are generally much more valuable than tax deductions, but many people don't fully understand the difference. A Tax Credit is subtracted directly from the tax you owe - dollar for dollar. An Itemized Deduction reduces the amount of income on which your tax is calculated. Its value depends upon your income tax bracket. SEE comparisons> .

What if my tax credit is more than the state income tax I owe this year?

Any credit that exceeds your Iowa income tax liability for the tax year of the donation may be credited to next year's taxes. This "carry-over" can be claimed for up to 20 years or until the full tax credit for your donation is claimed — whichever is earlier.

What if my donation is worth more than $200,000?

A donation valued at $200,000 would give you the maximum tax credit of $100,000. If your donation exceeds $200,000, you can claim an Iowa itemized deduction for the remaining value. SEE EXAMPLES.

How is this new tax credit different?

You used to be able to claim an itemized deduction on both state and federal income taxes for your donation of land for conservation. Now you can claim a state tax credit. Plus you can still claim your itemized federal deduction for a conservation-related donation. For more information on federal tax incentives available for conservation-related donations, see the Land Trust Alliance website.

What kind of land donation qualifies for this tax credit?

• Donation must be in land in Iowa
• Donation must be made after the 2008 tax year
• Must be "conveyed as an unconditional charitable donation in perpetuity to a qualified organization exclusively for conservation purposes." See references to codes and rules.These definitions align with the federal IRS rules for donating land or land value for conservation.

What if the donated land is not owned solely by me as an individual?

Individuals may claim the credit for donating land held in a partnership, a limited liability company, an S corporation, or an estate or trust electing to have the income taxed directly to the individual. The amount you can claim is based on your pro-rata share of your earnings of the partnership, limited liability company, S corporation or estate or trust.

How to claim the tax credit?

• Use the Form IA 148 "Tax Credits Schedule."
• Attach a copy of Federal Form 8283 'Noncash Charitable Contributions" which shows how you calculated the value of your donation. (You'll attach this same form to your federal tax return to claim your federal itemized deduction.)
• You'll need a qualified appraisal to claim a tax credit or deduction on a donation valued at more than $5,000. According to the IRS, the appraisal needs to be within 60 days before the date you sign your conservation easement. If the appraisal is completed after the date of the gift, the appraised value needs to be determined as of the date of the gift. SEE EXAMPLES.

NOTE: If you claim more than one kind of tax credit, you need to deduct the tax credits in a particular sequence.

For more information

Related links on the Iowa income tax credit for contributions of conservation land, effective for the 2009 tax year:

• Tax credit vs. itemized deduction
• Information on how to claim the new tax credit
• Examples show implications of tax incentives for your bottom line
• References to Iowa legal code and rules

 

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