Tax incentives help many landowners take advantage of conservation opportunities. This page reviews tax savings that may result from donations of land or conservation easements (also called “conservation restrictions” in Massachusetts). The following discussions reflect federal tax law as of 2011. Because individual circumstances vary and tax law is subject to change, you should consult with your own tax advisors when considering charitable contributions. Click here for information on the tax benefits of conservation giving.
Also, starting in 2011, landowners in Massachusetts who donate an interest in land for conservation purposes may be eligible for a tax credit of up to $50,000 on state taxes in the year of the donation. If the amount of the credit, which is based on the value of the gift, is larger than a landowner’s tax liability, the Department of Revenue will issue a check for the balance. For more see this handout on the Massachusetts Conservation Land Tax Credit Program.
INCOME TAX DEDUCTIONS
To qualify for state and federal income tax deductions on your income tax returns, your donation must be considered “charitable” by the IRS. Generally speaking, such a donation can only be made to an IRS-qualified, tax-exempt organization (such as Sudbury Valley Trustees). It must be considered a true gift motivated by charitable intent and not granted as a requirement for getting something in return (for example, a conservation easement donated by a developer, in exchange for government approval of a subdivision, is not considered a gift).
A gift must also be complete and irrevocable, without strings or contingencies (for example, if a donor specifies that land will revert to the family if mismanaged, that donation is not deductible). Generally, the IRS requires that donors give their entire interest in the property, except in cases of qualified conservation easements, remainder interests, and undivided interests, for which there are special exemptions (see “Conveying Ownership” handout for definitions
For tax deductions on gifts worth more than $5,000 (other than cash and publicly traded securities), landowners must obtain a “qualified appraisal” by a “qualified appraiser,” and file the appropriate form with their tax returns (these terms are defined by the IRS; check with your tax advisor for details).
You should consult with a professional appraiser who has direct experience with charitable gifts or easements. SVT can refer you to appraisers with experience in this field, but cannot provide the appraisal.
The appraisal expense is necessary if you want to pursue a charitable deduction. However, the cost of the appraisal, as well as the other costs incurred in making a charitable contribution (such as legal fees), are often themselves deductible. These fees can generally be deducted (as a business expense, not as a charitable donation) if – in combination with other miscellaneous deductions – they exceed 2% of your adjusted gross income.