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Conservation Easement Explained


by Paul Gallay

Conservation easements are one of the simplest means of preserving land; the IRS also recognizes them as charitable donations. For those landowners who might be interested, here's some background information.

What is a conservation easement?

A conservation easement is an agreement by which a property owner can protect environmentally significant lands, without giving up ownership or control of the property. In essence, a conservation easement restricts the amount of development allowable on a given property. Conservation easements are generally recognized as tax-deductible charitable donations. The easement does not require that the public be given access to the protected land.

Who should consider donating a conservation easement?

Any Westchester landowner may create a conservation easement. A landowner may choose to protect his or her entire property, or retain the right to build one or more houses at a future time. Properties can be in rural, suburban, or urban areas around the county. As an alternative to easements, landowners may donate property for conservation, or contribute funds with which to purchase land.

Are there tax benefits?

Income Tax: Conservation easements are recognized as deductible charitable donations under federal and state income tax law. To qualify for an income tax deduction, the IRS requires that a conservation easement meet certain "conservation purposes," which include: preservation of significant habitat, public views, historic lands or structures; opportunities for the general public to enjoy outdoor recreation or education; or, other public benefits such as watershed protection. A deed restriction placed on the property in the absence of a conservation easement does not provide the tax benefits described above.

Estate Tax: Escalating real property values stemming from development pressure has made land passing through an estate an expensive proposition. Because estate tax rates are so high - as much as 55% on estates over $600,000 - land that has been in the family often has to be sold to pay the taxes, and the heirs may have little discretion about to whom it is sold and for what purposes. While legislation has been enacted to eliminate estate taxes, they will remain in effect for the coming decade.

How is the donation valued?

In order to qualify for a tax deduction, the donor of a conservation easement must have the value of the easement established by a qualified appraiser. The appraisal simply measures the development value of the property, before and after the easement limits went into effect. For instance, if a conservation easement prohibits all further subdivision, the appraiser documents that the land could be subdivided under existing regulations, and measures the number of buildable lots. The appraiser than calculates the market value of the buildable lots given up, which establishes the value of the donation for tax purposes.

What is the first step if I am interested in creating an easement?

To get started on a conservation easement, or to learn more about easements, contact Paul Gallay, Executive Director of Westchester Land Trust at 241-6346. Or visit www.westchesterlandtrust.org and click on: Easements Q & A.



 

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