Powerful New Federal Income Tax Deductions for Conservation Restrictions

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Powerful New Federal Income Tax Deductions
for Conservation Restrictions

June 2008

Powerful new legislation recently passed by both houses of Congress will help many landowners get a significant tax benefit for making the extraordinarily valuable donation of a conservation restriction, restricting future development of their land to protect a resource important to the public.

This legislation will:

· Raise the maximum deduction a donor can take for donating a conservation restriction from 30% of their adjusted gross income (AGI) in any year to 50%;

· Increase the number of years over which a donor can take deductions from 6 years to 16 years.
This provision would be effective for conservation restriction donations made from January 1, 2008 through December 31, 2009. After that, the law would revert back to previous provisions, unless Congress extends the provision prior to the deadline.

An example of how the new tax benefits should work:

Value BEFORE federal tax law:

$1,000,000 Appraised value of land before CR
$ 200,000 Appraised value of land after CR
$ 800,000 Charitable deduction
$ 100,000 Adjusted gross income (AGI) of landowner
$ 30,000 Maximum use of charitable deduction each year (30% of AGI)
$ 180,000 Six-year total deduction ($30,000/yr. x 6 yrs.)
$ 45,000 Six-year total tax savings (assumes 25% tax bracket)

Value AFTER federal tax law:

$1,000,000 Appraised value of land before CR
$ 200,000 Appraised value of land after CR
$ 800,000 Charitable deduction
$ 100,000 Adjusted gross income (AGI) of landowner
$ 50,000 Maximum use of charitable deduction each year (50% of AGI)
$ 800,000 16-year total deduction ($50,000/yr. x 16 yrs.)
$ 200,000 16-year total tax savings (assumes 25% tax bracket)

Please share this information with your tax advisor and include it in your financial planning for the year in which you complete the conservation restriction.

This is the biggest boon for conservation land giving in my 20 years of experience in this field.

Mark H. Robinson
Executive Director