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Potential Benefits of Donating an Easement

The first benefit is the perpetual conservation of the land you love.

Second, there are a number of potential federal and state income and estate tax incentives that may be of great benefit depending on your financial situation. Income tax rules are complex and subject to varying interpretations so consult your tax advisor.

In general, those benefits are:

• Federal Charitable Income Tax Deduction: For easements donated between 2006 through 2011, the value of the easement can reduce the donor’s adjusted gross income up to 50% per year for up to 16 years. This percentage is increased to 100% of adjusted gross income if the donor is a qualifying farmer with farm income of greater than 50% of income.
• Estate Tax Reduction: The donation of an easement will remove the value attributable to the easement from the donor’s estate for estate tax purposes thus lowering the value of the land as an asset within the estate.
• Real Estate Tax Reduction: Land in easement is often considered by local jurisdictions to be in “land use” and as such pays lower real estate taxes.
• Virginia Land Preservation Tax Credits: This state tax credit can be used to offset the donor’s Virginia income tax liability dollar-for-dollar. Any unused credit may be sold to other Virginia taxpayers. A simple example:
   
  
  
  
  • $2,000,000 - Property value BEFORE the ease­ment is donated
  • $1,000,000 - Property value AFTER the ease­ment is donated
  • $1,000,000 - Value of the conservation ease­ment (Federal deduction)
  • $400,000 - 40% Virginia Land Preser­vation Tax Credit
  
  

Disclaimer: This information is for informational and educational purposes only.  Atoka does not provide legal or tax advice and nothing herein should be considered professional advice. Additionally, Atoka does not provide a guarantee or warranty to either credit sellers or buyers. Credit sellers and their advisors are responsible for ensuring that the sellers’ credits meet all federal and state law requirements.