Donating a conservation easement (CE) allows landowners to continue to own their land while at the same time conserving and protecting Georgia’s forests and farms. In addition, donors may be eligible for certain federal, state, and estate tax benefits for qualifying donations.
The following summary is for general informational purposes only. Landowners must obtain professional financial and legal advice in order to determine if and how the various benefits might apply to their specific situation.
Federal Income Tax Incentive
In addition, the donor must also:
· Obtain a qualified appraisal
· Have a baseline inventory of the property describing the natural and man-made features
· Include IRS Form 8283 and a Supplemental Statement with the donor’s income tax return
· Provide a written acknowledgement letter from the land trust documenting the acceptance of the easement donation
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How the tax deduction works:
The conservation easement’s value (the landowner’s charitable donation) is calculated by finding the difference between the property’s value before the conservation easement (CE), and the value of the property with the CE, as determined by a qualified appraisal. Typically, the more rights given up in a CE, the higher the CE value. The deduction is generally equal to 50 percent of the landowner’s adjusted gross income (AGI) with a carry forward period of 15 years.
Example:
Landowner donates an easement on land that is valued at $1 million before the conservation easement is placed. After the conservation easement, the land is now worth $600,000. The value of the CE is therefore $400,000 ($1 million - $600,000). The landowner may deduct a portion of the CE value equal to 50 percent of his/her AGI. If the landowner’s AGI is $50,000, then s/he can take a $25,000 deduction for the year of the donation and assuming the same AGI, take the same deduction for an additional 15 years, for a total of $400,000 in deductions.
State Income Tax Benefits
How the state tax credit works:
The tax credit is equal to 25 percent of the conservation easement’s value up to a maximum of $250,000 for individuals, and $500,000 for corporations and partnerships.
The tax credit may not exceed the amount of tax owed.
Any unused portion of the tax credit may be carried forward for the next 10 years.
The State Tax Credit is transferable.
There are other requirements that must be adhered to, and consultation with your tax adviser is strongly recommended.
There is a process for pre-certification and certification of the conservation easement.