Tax Benefits of Donating a Conservation Easement

There is very little funding available to pay landowners for conservation easements. Most landowners who enter into a conservation easement donate the value of the easement in exchange for state and federal tax benefits.

Tax regulations change frequently, and landowners must consult their financial advisors for specific guidance. The tax benefits are described briefly below, more detailed information is available from the DCR website.

State Income Tax Credits

Landowners that donate a perpetual conservation easement in Virginia can receive state income tax credits equal to 40% of the value of the easement. Taxpayers may use these credits up to $100,000 per year for the year of the donation and for ten subsequent years. For landowners that cannot use all of their tax credits, the credits can be sold. This is the most effective conservation tool in the state today, enabling landowners regardless of income level to receive cash in exchange for conserving rural land. Since 2007, the total amount of tax credits available statewide has been capped at $100 million annually.

Charitable Deduction

The donation of a conservation easement to a qualified organization can be claimed as a charitable deduction on the landowner’s federal tax return. The portion of annual income that can be offset each year and the number of years over which the deduction can be spread are subject to change, consult you tax advisor for current regulations.

Estate Tax Benefits

Because land under a conservation easement usually has a lower value, donating a conservation easement can reduce the tax liability on the estate.

Local Real Estate Taxes

Properties restricted by a conservation easement are eligible for reduced real property taxes. In localities that have land use taxation, properties with conservation easements must be allowed to enroll in land use. Properties that are already enrolled in land use would receive no additional benefit. In localities that do not have land use taxation, the real property tax should reflect the reduced value of a property with a conservation easement in place.

Last modified: Thursday, 06-Nov-2014 10:24:41 EST