Why Protect Your Land?
Because they ain’t makin’ any more of it!
People’s reasons for protecting their land are complicated. Some folks want to make sure that the land that they love will be passed down intact through future generations of their family. Some people fiercely want to stave off development. Some are passionate about conserving the ecological quality of their land, or making sure that it remains an important gem in a watershed necklace. But most people feel a combination of all of the above . . . and more.
We’re here to help. We’re your local land conservation organization.
John and Maureen Robinson tell the story of their land, Hawthorn Hill Farm.
Thank Heaven for like-minded folk, professional and amateur, who can still glimpse and help preserve the Paradise that once was, and still can be.
Brass Tacks
In many situations, the donation of land as well as conservation easements comes with a variety of tax advantages.
Conservation Easements
A conservation easement is a legal agreement which is recorded to the property deed in perpetuity that prohibits development and protects identified conservation values. Conservation values are a critical component, defined in the IRS tax code, and the basis for why IRS-qualified organizations, such as the Southwest Michigan Land Conservancy, protect land and allow landowners to be eligible for a federal tax deduction with a conservation easement donation.
Income Tax
To determine the potential income tax deduction for a donated conservation easement, the property owner hires a qualified appraiser who will appraise the property at its highest and best use, the unrestricted value, and then appraise the property with the restrictions of the conservation easement in place. The difference between those two appraisal values is considered a charitable donation for your personal federal income taxes which is currently up to 30% of your adjusted gross income. If the entire value of the donation is not used in the first year, the excess can be carried forward and deducted (with the 30% limit) for up to five additional years.
Relevant tax news from July 2014.
Estate Tax
Another incentive to placing a conservation easement on your property is the potential estate tax breaks. Too often, when the next generation inherits the family-owned land, they have to unwillingly split up the property and sell a portion of it to pay the estate taxes. A conservation easement donor is eligible for an exclusion from estate tax of up to $500,000.
Property Tax
The final tax incentive to placing a conservation easement on your property is a property tax break for the next landowners. When transferring property on to the next generation, the property tax is uncapped and reassessed with the taxable rate readjusting or “popping-up” to the SEV, increasing the tax rate and property taxes. With Public Act 446 passed in 2006, all properties with a conservation easement are exempt from the “pop-up” tax. If a property has been under one ownership for a long time and accrues value without the property taxes rising more then 5% from one year to the next, at transfer the taxes can “pop-up” significantly. Placing a conservation easement on a property to keep the cap in place can be a strong incentive in the marketing of a property to potential buyers.
This is a brief overview of the tax advantages of placing a conservation easement on your property. To determine how a conservation easement donation may affect your taxes, consult your own professional tax and/or legal advisor.
If you would like more information about conservation easements and the steps to conserving your property, check out How to Protect Your Land or contact the SWMLC land protection department.
Southwest Michigan
Land Conservancy
8395 East Main St.
Galesburg, MI 49053
269-324-1600 conserveland@swmlc.org
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