Land Donation in Fee Title
Tax Benefits of Donating Land for Conservation
Federal Tax Benefits
There are two main kinds of federal tax benefits available to donors of conservation land: income tax benefits and estate tax benefits.
Federal Income Tax Benefits
Donors of land and conservation easements may claim an income tax deduction for a charitable contribution made in accordance with Section 170 of the Internal Revenue Code. The exact amount of tax savings depends on several factors:
- The length of time a donor has owned the property (benefits are generally greater if owned for more than one year);
- How the donor has used the property (residence, investment, agricultural);
- The income of the donor (the higher the donor’s income, the more the donor will save on taxes);
- The value of the donated property (the more valuable the property, the larger the deduction).
Federal Estate Tax Benefits
A donor may also save substantially on estate taxes if he or she donates a conservation easement. Under Section 2031(c) of the Internal Revenue Code, up to $500,000 may be excluded from a donor’s taxable estate if he or she has donated a qualifying easement. As with the income tax benefits, the larger the value of the donated easement, the bigger the deduction.
State Tax Benefits
California law generally conforms to federal law with respect to deductions for charitable contributions of a donor’s entire interest in real property or a charitable contribution of a conservation easement with some important exceptions, including, but not limited to, limitation of the deduction to a taxpayer’s basis in the property.
Local Property Tax Benefits
In general, property tax reductions are available for donors who donate their entire interest in land or a conservation easement. However, special consideration should be taken before making a request for reduction in property taxes as such a request may trigger a reassessment of the entire property, which could result in an higher overall property tax liability in some circumstances.