F.A.Q.

What are the tax benefits of giving a conservation easement?

The rights a property owner relinquishes, and those that are retained, are set forth in the conservation easement.  This easement is transferred permanently to a qualified conservation organization such as The Land Trust for Tennessee.  When the document is signed and recorded at the courthouse, the property’s current and future owners can no longer exercise the rights that have been given up.  Those rights have a financial value.  To determine that value, an appraisal is conducted.  This appraisal must be performed in accordance with guidelines stipulated by the Internal Revenue Service.  Here is an example.  Let us say that the appraised, fair market value of your 100 acre tract of land is $5,000 per acre, or $500,000.  You wish to limit its future use solely to farming by placing a conservation easement on the land.  The appraisal shows that the land’s value without being able to develop it is reduced to $3,000 per acre, or $300,000.  The difference of $200,000 can be claimed as a $200,000 charitable contribution by you to the organization designated to hold the conservation easement. Your tax attorney and accountant will tell you all of your specific tax benefits, but generally, you may expect the following:

 Federal Income and Capital Gains Tax Benefits- Congress passed new incentives*! 

Under the IRS code, the value of the donation of a qualified conservation easement can be deducted at an amount up to 50 percent (up from 30%) of the donor’s adjusted gross income in the year of the gift.  If the easement’s value exceeds 50 percent of the donor’s income, the excess can be carried forward and deducted over all or part of the next 15 years (up from 5 years). *Note: These tax incentives are currently only for conservation easements donated in 2006 through 2010. 

Property Tax Benefits

A conservation easement may reduce or stabilize property taxes, depending on current zoning and land use and current assessed value.

The donation of a conservation easement, whether during the landowner’s life or by bequest, can reduce the value of the land upon which estate taxes are calculated.  This benefit can often mean the difference between heirs having to sell or develop the property to pay estate taxes, or being able to keep the property in the family.  A conservation easement may be an effective way to pass land on to the next generation in its natural state.

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