Conservation Easements – Easy Tax Savings (Update)

You may not be able to have your cake and eat it too, but you can own your land and donate it too.

Conservation easements allow a property owner to maintain ownership of his land while ensuring it will be preserved in perpetuity.  This allows a land owner to maintain private ownership of the land while also limiting development, essentially making a charitable donation and therefore receiving a tax deduction for the reduction in value under IRC sec. 170.

Although the landowner will maintain possession of the land, the conservation easement burdening the land is permanent and runs with the land, so the land can be transferred, but the conservation easement restrictions will always remain in place.

Why would you want to burden your land forever?  Besides the charitable aspect, a landowner can save a significant amount of real estate taxes, income taxes, and estate taxes with a conservation easement.  A landowner who places a conservation easement on his land can offset up to 30 percent of federal taxable income, and up to a six year carryover of any unused deduction.  Additionally, there are state tax credits in Georgia and many other states for conservation easements.

The amount deductible from tax will be the difference between the value of the property before the conservation easement and the value of the property after that conservation easement, which must be determined by a qualified appraiser.

The landowner grants the conservation easement to either a government unit or a charity and the contribution must be exclusively for “conservation purposes.”

The state of Georgia gives a dollar-for-dollar income tax credit for 25 percent of the fair market value of the donation, up to a maximum credit amount of $250,000.  It can be carried forward for 10 years.  Additionally excess credits can be sold to other taxpayers for cash.  However, there is a $5,000 application fee.

For more information regarding this or any other estate planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.