A conservation easement is a voluntary agreement between a land owner and a land trust that is permanently binding on the land, no matter who owns it. The landowner retains all rights to own, sell and use the land according to the provisions of the easement. Most easements will not allow for development of the land under the easement. This diminishes the value of the eased land and this reduction in value may qualify for treatment as a tax-deductable charitable contribution.
The tax incentives for conservation easements have just been increased by enactment of the Farm Bill, which became law when the Senate recently overrode a Presidential veto of the bill, following an earlier House override.
Highlights of the expanded tax incentives, which are retroactive to January 1, 2008 and apply to qualifying easements placed on properties through December 2009, include the following:
- Deductions shield 50% (vs. the previous 30%) of annual adjusted gross income from federal taxes
- Any portion of a deduction not used in a given tax year can be carried forward for up to 15 consecutive tax years (the previous carry-forward period was 5 years)
- Farmers who derive more than 50% of their income from an eased property can use the resulting deduction to shield 100% of their income from federal taxes
The financial value of these temporary tax incentives is currently enhanced by the fact that conservation easements are properly valued using comparable sales data from the preceding two years. While the real estate market has slowed in recent months, easements placed in effect in the near future will be valued in part by top-of-the-market sales transactions from 2006 and 2007.
For more information, go to:
Open Space Equity
Website: http://openspaceequity.com/
P.O. Box 50
Washington Depot, Connecticut 06794
860.868.2611
info@openspaceequity.com
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