How the Easement Incentive Works
Note: The enhanced deduction for conservation easement donations expired Dec. 31, 2014.
Thanks to the hard work of Senator Max Baucus (D-MT), along with land trusts and coalition partners around the country, on Aug. 3, 2006 the Congress approved a tremendous expansion of the federal tax incentive for conservation easement donations. This was a great victory for conservation!
In 2006 and 2007 the tax incentive helped America’s land trusts increase the pace of land conservation by at least 535,000 acres compared to the previous two years! The law:
- Raises the maximum deduction a donor can take for donating a conservation easement from 30% of their adjusted gross income (AGI) in any year to 50%;
- Allows qualified farmers and ranchers to deduct up to 100% of their AGI; and
- Increases the number of years over which a donor can take deductions from 6 years to 16 years.
These changes enable family farmers, ranchers, and other moderate-income landowners to get a significant tax benefit for donating a conservation easement on their land. Under prior law, an agricultural landowner earning $50,000 a year who donated a conservation easement worth $1 million could take a total of no more than $90,000 in tax deductions! Under the new law, that landowner can take as much as $800,000 in tax deductions – still less than the full value of their donation, but a significant increase.
The 2006 law also set higher standards for appraisers and appraisals of all donated property, and set higher penalties for abusive appraisals. Conservationists supported this to ensure the integrity of the charitable donation process. The law also tightened restrictions on donations of easements to protect historic buildings. These reforms did not expire at the end of last year.