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| The Yablon easement in Irvington protects a view of the Hudson. |
Conservation easements benefit both the community and the individual donor. Peter Hauspurg of Bedford and Lori Ensinger of Somers have both
donated conservation easements to Westchester Land Trust. You can read
what they have to say about the benefits and the process here and here.
An Explanation of the Federal and State Tax Benefits for Conservation Easement Donors
Two tax laws provide exceptionally good news for conservation-minded landowners. If you've been thinking about protecting your land with a conservation easement as a way to safeguard your community's open space, drinking water supplies and wildlife habitats, federal and state tax laws provide the added benefits of a federal income tax deduction and a state income tax credit.
FEDERAL INCOME TAX INCENTIVE- 2008 & 2009
The law gives certain easement donors up to 16 years to take
their income tax deduction, and allow donors to deduct up to 50% (100% for
farmers) of their adjusted gross income each of those years*.
What follows are three examples of how the
law can benefit conservation easement donors, which should give you some useful
information to start. Of course, the
particular value of your own property and your own specific tax picture will
determine how the easement deduction would work for you, and you should consult
with your own tax adviser before making a decision.
New York State Income Tax Incentive
There is also a new Conservation Tax Credit in New York State for donors of conservation easements. If a landowner donates a conservation easement that meets IRS requirements, they will receive an annual state income tax credit for 25% of the property taxes on their easement-restricted land, up to $5,000 (not including taxes on structures). This tax credit is available to all owners of land with qualified conservation easements (according to the IRS), regardless of when the easement was created and it runs with the land so that successor owners will also benefit.
FEDERAL INCOME TAX INCENTIVE EXAMPLES- 2008 & 2009 (NEW
LAW)
Example one - a landowner with $100,000 income and easement
donation worth $500,000:
A landowner with an adjusted gross income of $100,000 and no
charitable donations or other tax deductions could pay $13,890 in federal
income taxes, annually.
If the landowner makes a conservation easement donation
worth $500,000, here's what their federal deduction and tax savings would look
like with the new law in comparison with the old:
Old law: The landowner would have a $30,000 deduction/yr x 6
yrs = $180,000 total deduction, which would earn the landowner an income tax
savings of $4,925 a year for six years, assuming the donor's tax picture
remained the same during that time, for a total tax savings of $29,550.
New law: The landowner will have a $50,000 deduction/yr x 10
yrs = $500,000 total deduction, which would earn the landowner an income tax
savings of $8,135 a year for ten years, assuming the donor's tax picture
remained the same during that time, for a total tax savings of $81,350.
The new law allows this landowner to deduct the full value
of the donation and this yields a tax savings that is 275% higher than the
savings earned under the old law.
Example two - a landowner with $200,000 income and easement
donation worth $500,000:
A landowner with an adjusted gross income of $200,000 and no
charitable donations or other tax deductions could pay $40,672 in federal
income taxes, annually.
If the landowner makes a conservation easement donation worth
$500,000, here's what their federal deduction and tax savings would look like
with the new law in comparison with the old:
Old law: The landowner would have a $60,000 deduction/yr x 6
yrs = $360,000 total deduction, which would earn the landowner an income tax
savings of $13,640 a year for six years, assuming the donor's tax picture
remained the same during that time, for a total tax savings of $81,840.
New law: The landowner will have a $100,000 deduction/yr x 5
yrs = $500,000 total deduction, which would earn the landowner an income tax
savings of $23,959 a year for five years, assuming the donor's tax picture
remained the same during that time, for a total tax savings
of $119,795.
The new law allows this landowner to deduct the full value of the donation and this yields a tax savings that is about 150% higher than the savings earned under the old law and the savings can be taken in five years instead of six.
Example three - a landowner with $500,000 income and easement
donation worth $1,250,000:
A landowner with an adjusted gross income of $500,000 and no
charitable donations or other tax deductions could pay $143,876 in federal
income taxes annually.
If the landowner makes a conservation easement donation
worth $1,250,000, here's what their federal deduction and tax savings would
look like with the new law in comparison with the old:
Old law: The landowner would have a $143,000 deduction/yr x
6 yrs = $858,000 total deduction, which would earn the landowner an income tax
savings of $46,449 a year for six years, assuming the donor's tax picture
remained the same during that time, for a total tax savings of $278,694.
New law: The landowner will have a $243,000 deduction/yr x 5
yrs = $1,215,000 total deduction, which would earn the landowner an income tax
savings of $79,814 a year for a little more than five years, assuming the
donor's tax picture remained the same during that time, for a total tax savings
of $410,565.
The new law allows this landowner to deduct the full value
of the donation and this yields a tax savings that is about 150% higher than
the savings earned under the old law and the savings can be taken in a little
over five years instead of six.