Conservation Easements can be defined as a legal agreement between a landowner and a conservation organization that exists for the protection of agricultural, historic and scenic properties. The conservation easement is recorded in the county clerk's office and prohibits any future development of the land. This agreement runs with the land and is in perpetuity.
Donating a conservation easement to a recognized conservation organization is treated as a charitable donation by the IRS. There are significant tax benefits to donating a conservation easement. On the federal level, the donation is treated as a tax deduction whereas in the state of Virginia, the donor can receive substantial tax credits.
The amount of the deduction and credit is determined by a certified appraiser. The appraiser calculates what the property is worth with all the division rights intact and then what the property is worth without those rights and the difference between the two is the value of the conservation easement.
On the Federal level, the easement value can be deducted at a maximum of 50% of the donor's adjusted gross income per year and the unused portion can be carried forward for up to fifteen years or until the amount is expended.
In Virginia, starting in 2007, the donor can receive a tax credit of up to 40% of the value of the easement. The donor may use the tax credit to offset taxes owed and carry forward any unused portions for up to ten years. In the event that the donor cannot use all or part of the Virginia tax credits they can be sold to any Virginia taxpayer. This information may change at any time, so always consult with your accountant and tax attorney for the most recent details and information.
Regardless, before placing a property in a conservation easement, you should talk with your accountant and attorney to make sure this satisfies your goals both now and into the future.
This article is just a brief synopsis of the Conservation Easement program in the state of Virginia and should not be construed as legal advice.