Good News for Conservation Easement Donors
Expanded Tax Incentives for Conservation Easements
Congress recently approved expanded federal income tax deductions for conservation easement donations. The law combines stronger tax incentives with several important reforms to the rules for easement donors (outlined below). The Land Trust Alliance web site has more detailed information on these changes and their implications.
Expanded Charitable Deductions
Individual taxpayers donating an easement in 2006 or 2007 can now claim a charitable deduction up to 50 percent of their adjusted gross income (up from 30 percent previously), with the remainder eligible to be carried forward for up to 15 years (increased from 5 previously). Easement donors who previously could not have deducted the full value of their gifts will be able to deduct more of that value over a longer time period, and will not lose these benefits simply because their income level is modest.
Under the former rules, an individual with an annual adjusted gross income of $50,000 who donated a conservation easement worth $200,000 could deduct up to $15,000 of the easement gift in year one, and another $15,000 over each of the next five years, for a total deduction of $90,000 spread over six years. Under the new rule, this same donor can deduct up to $25,000 in the year of the donation and an additional $25,000 in each of the ensuing seven years so no part of the deduction goes to waste.
The benefits are even greater for farmers and ranchers, who can deduct up to 100 percent of their adjusted gross income (assuming that 50 percent or more of their gross income comes from the “trade or business” of farming or ranching).
This article draws on material prepared by the Land Trust Alliance and on the August 2006 Maine Land Conservation Law E-Bulletin written by Robert H Levin, Esq. (e-mail firstname.lastname@example.org for a free subscription).