Tax Incentives PDF Print E-mail

 

Federal Income Tax Deduction

State Income Tax Credit

State Capital Gains Exclusion

Estate Tax Reduction

Local Property
Tax Reduction

Sale of Land at Fair Market Value

 

 

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Sale of Easement at Fair Market Value

 

 


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Donated Easement

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Donated Land

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Bargain Sale

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Bequest of Easement

 

 

 

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Bequest of Land

 

 

 

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Most landowners donate land or a conservation easement to preserve the natural, scenic, and historical integrity of their property. As well as the peace of mind that comes from knowing that your land will be protected forever, there may also be significant federal, state, and local tax incentives for donating a conservation easement or a piece of land to the Northern Virginia Conservation Trust (NVCT).


Federal Income Tax Deduction

The donation of a conservation easement to the Trust normally qualifies as a federal tax-deductible contribution, entitling the donor to a charitable income tax deduction for the easement’s value. An easement’s gift value is based on “before” and “after” appraisals—the assessed value of the land before the conservation easement is in place, and the assessed value afterwards. The difference between the two appraisals is considered the value of the conservation easement or gift. As of February 1, 2011, Congress has extended a “sweetener” provision through 2011 (and made it retroactive for 2010) for donation of a qualified conservation easement. Thus a donor of a qualified conservation easement may deduct up to 50% of the donor’s adjusted gross income per year, and any unused portion of the gift can be carried forward up to 15 additional years or until it is expended, whichever happens first. Additionally, farmers who receive more than 50% of their income from agricultural activities can deduct up to 100% of their income. Standard charitable contributions are deductible up to 30% of the value for up to 5 years, so the sweetener provision is a major incentive for donating conservation easements. There is currently a push in both the Senate and House to make the sweetener provision permanent – NVCT encourages you to contact your federal legislators and let them know you support the land conservation tax incentive!

The difference between the two appraisals is considered the value of the conservation easement or gift. For qualified conservation easements, up to 30% of the donor’s adjusted gross income can be deducted per year and any unused portion of the gift can be carried forward 5 additional years or until it is expended. Farmers who receive more than 50% of their income from agricultural activities can deduct up to 100% of their income.


Federal Estate Tax Reduction

As of 2010, the Federal Estate Tax is in flux. We will update the details on Estate Tax savings from donation of a conservation easement as soon as possible. Please call with any questions. (PAST:A reduction in estate taxes benefit a landowner’s heirs who may have otherwise had to sell the property in order to pay the estate taxes. By donating an easement, the total value of the estate may be reduced by the value of the easement. In addition, up to 40% of the remaining value of the property can be excluded from the taxable estate.)

Virginia Income Tax Credit

A tax credit is different than a tax deduction as it represents a direct offset against tax owed rather than a reduction of the income against which tax is assessed — a dollar for dollar value.

For a qualifying gift, donors may be eligible for a Virginia income tax credit equal to 40% of the value of the donated interest for the year donated and any unused portion of the credit can be carried forward 13 additional years, limited to $50,000 per year. Furthermore, Virginia allows for the sale of any unused credits to another taxpayer, and there is a market for such sales.

Local Property Tax Reduction

Under State law, Virginia counties must reassess a property after a conservation easement is placed on it to take into account conservation protections. The new assessment reflecting the easement is called a “use value assessment.” By giving up development or other property rights in an easement, the maximum potential use of the property has changed, thereby lowering the property tax. The amount of the reduction in property tax depends on the affect of the easement on the fair market value of the property.

 

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