Land conservation has tax benefits
By: Michele S. Byers
It’s an ironic coincidence that the looming April 15 tax deadline is in the middle of the glorious renewal of life: spring. Birds are singing, flowers are bursting with blooms and we’re inside crunching numbers for tax time!
If, like all of us, you are looking for ways to reduce your tax bill, you might want to consider the benefits of land conservation! You can donate some or all of your land, or sell it at a "bargain sale" for below fair-market price, claiming the difference as a charitable deduction. You also can donate a conservation easement (which limits the type and scope of future development on your land) and reap some serious tax savings.
Here’s a quick analysis of the potential tax benefits, as provided by the national Land Trust Alliance (LTA):
Income Taxes. U.S. tax law allows you to deduct up to 30 percent of your adjusted gross income in the year you donate appreciated land or conservation easements to a qualified nonprofit. If the value of the donation exceeds that deduction, you can carry forward the balance for up to five additional years.
For example, if Mr. Highlands has an adjusted gross income of $50,000 and he donates $80,000 worth of land, his deduction in the first year would be $15,000. The balance can then be carried forward for each of five years, until he has deducted the full $80,000 value of his gift.
Estate Taxes. Because New Jersey property values have dramatically increased over the past 20 years, some people are forced to sell land that has been in the family for generations in order to pay estate taxes. New Jersey’s small farms have been especially hard hit.
For example, lets look at a South Jersey farm bought by Mr. and Mrs. Smith in the 1960s when land was cheap. The farm is worth $1.25 million today, and the now widowed Mrs. Smith and her late husband accumulated just $250,000 in other assets, giving her a total estate of $1.5 million.
The combined state and federal estate taxes will be more than the surviving Smith children can afford to pay, even though they want to keep the farm and see it remain as open space.
Mrs. Smith may want to consider donating a conservation easement on the farm, which would keep the property preserved and, for tax purposes, help reduce the value of her estate.
If Mrs. Smith donates a conservation easement on the farm that reduces its market value from $1.25 million to $750,000, the value of her total estate would be reduced to $1 million, and no estate taxes would be due.
What a win-win situation! The farm remains open space, and the family gets a significant tax break. The nation’s 1,200-plus nonprofit land trusts have been tremendously successful at saving land more than 6.2 million aces by the end of 2001 and this is one of the ways it gets done.
Please note that these are simplified examples only all nonprofit land trusts advise landowners to get their own professional tax advice.
If you would like more information about how land trusts can help you conserve your land, and the many ways conservation could potentially benefit you as a landowner, please contact NJCF at 1-888-LAND-SAVE or [email protected], or visit NJCF’s Web site at www.njconservation.org.
Michele S. Byers is executive director of the New Jersey Conservation Foundation.