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Income tax benefits
NOTE: Federal income tax incentives for dontated conservation easements changed recently. as of December 31, 2009, income tax benefits for gifts made in 2007-2009 "sunset" and reverted to the rules governing gifts before that. There is a well-supported bill to have the more generous incentives reinstated before Congress, but it has not yet passed.
If you make a gift of land or a conservation easement
to a public agency or a land trust, you may be able to deduct the
fair market value of that donation from your Federal Income Taxes. Under the current tax law, qualified conservation gifts are deductible up to 30% of your adjusted gross income in the
year of the gift. Any remaining value can be carried forward as
deductions in the next five years, up to 30% of the original adjusted
gross income each year. This tax deduction can be made for the portion
of a bargain sale
that is given, not sold, as well.
Outright gifts of money or other assets are the
simplest way to support a land trust and gain a tax deduction. Donations
of other assets, like securities, stocks, life insurance, or valuables
such as artwork, also may be given. Such donations are deductible
up to the value of the donated item. Taxpayers cannot eliminate
all taxable income by making charitable donations. Individuals can
deduct up to 50% of their Adjusted Gross Income for cash donations.
Estate Tax Benefits
Many heirs to large tracts of open space, farms,
natural areas or timberland face substantial estate taxes. Estate
tax is levied on a property’s "highest and best use"—usually
the amount a developer or speculator would pay. The resulting tax
burden can be so large that the heirs must sell the property to
pay the taxes.
A conservation easement can reduce estate taxes because the donation
of the easement reduces the value of the property. An easement can
be donated in a will, and then deducted from the taxable estate.
These easements can also be donated or strengthened post-mortem
by the estate’s Executor.
In certain circumstances, Federal tax law also
allows for a 40% reduction in the remaining value of the land covered
by an easement when that easement was donated to a qualified organization.
This reduced value is the basis for any estate tax. Other exclusions
from Estate Taxes may also apply. You should consult your tax advisor
about these potential advantages.
Property Tax Benefits
Local real property tax assessments are based
on a property's full-market value, which takes into consideration
the property's development potential. If a conservation easement
reduces or removes this potential, the level of assessment and,
accordingly, the amount of real property taxes, may be reduced.
Wisconsin Statute §70.32(1g) requires local tax assessors to
consider the effects of a conservation easement when assessing property.
In practice, there has been wide variation in how easements are
considered by assessors across the state.
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