 |
| 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.
Federal & State Tax Laws:
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
The IRS considers certain conservation easements to be tax-deductible charitable contributions*. The value of the donation is equal to the fair market value of the property before the easement, with its development rights intact, minus the fair market value after the easement.
Donors of tax-deductible conservation easements have up to 16 years to take their income tax deduction, and can deduct up to 50% of their adjusted gross income each of those years.
Donors of tax-deductible conservation easements have up to 16 years to take their income tax deduction, and can deduct up to 50% of their adjusted gross income each of those years.
Below are three examples of how the law can benefit conservation easement donors, which should give you 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 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
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 his or her federal deduction and tax savings would look like:
The landowner would have a $50,000 deduction per year x 10 years = $500,000 total deduction, which would earn the landowner an income tax savings of $8,135 a year for 10 years, assuming the donor's tax picture remained the same during that time, for a total tax savings of $81,350*.
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:
The landowner would have a $100,000 deduction per year x 6 years = $500,000 total deduction, which would earn the landowner an income tax savings of $23,959 a year for six years, assuming the donor's tax picture remained the same during that time, for a total tax savings of $119,795*.
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:
The landowner would have a $243,000 deduction per year x 5 years = $1,215,000 total deduction, which would earn the landowner an income tax savings of $79814 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*.
* These savings are indicative and actual savings may vary.