Conservation Easements: Save the Land, Save Your Money

Qualified conservation easements are becoming an increasingly popular way to save on your tax bill, but what exactly is a conservation easement, and what do you need to know to capitalize on this opportunity?

Simply put, a conservation easement is “a restriction placed on a piece of property to protect its associated resources.” To reap the tax benefits from a conservation easement, the landowner must gift an interest in his or her qualified real property to a public agency or qualifying 501(c)(3) organization. The gift must meet four criteria to constitute a qualified conservation contribution:

  1. Be a qualified real property interest
  2. Be donated to a qualified organization
  3. Be for qualified conservation purposes
  4. Be exclusively for conservation purposes

Essentially, the landowner retains ownership of the property, and can continue to live on the property for generations, but the conservation easement contribution permanently eliminates any developmental rights. This permanency is desirable to some, but could be problematic for future generations if ecological conditions or personal intentions change. However, the deduction associated with a conservation easement can be significant, and many feel the tax benefits outweigh the negative aspects.

Tax incentives, such as both federal income and estate tax deductions, can be other “positives” associated with conservation easements. Under the Internal Revenue Code, conservation easements are considered charitable donations. Landowners can deduct the value of the easements, with the value generally calculated as the difference between the fair value of the land before the easement is granted, and the value of the land after the grant. There are some limitations on the amount of deduction one can take, but generally this deduction results in large tax savings.

Reduction in, and sometimes relief from, estate taxes can be another significant incentive. When the conservation easement lowers the property value of the estate to be taxed, the estate tax will be calculated on a lesser amount, so the estate will owe less in taxes. Another estate tax benefit comes from allowing heirs to exclude 40% of the value of the property remaining after the granting of the easement from the estate. This exclusion is capped, and there are other restrictions, but together these two incentives could significantly reduce the taxpayer’s estate tax liability.

There are specific rules relating to what qualifies as a “gift” of an interest in property, and limitations regarding to which organizations the property may be gifted. However, once the gift is made, it needs to be valued correctly, and disclosures must be made to accurately record the contribution. In order for the donor to take a deduction, he or she must obtain and attach a qualified appraisal to his or her income tax return, along with a signed copy of Form 8283, “Noncash Charitable Contributions.” In addition, the taxpayer must file with the return, Form 8886, “Reportable Transaction Disclosure Statement,” to provide the IRS with specific information regarding the donated property.

While this article has highlighted merely a few, there are many aspects and tax benefits associated with conservation easements. If you are interested in learning more about the tax benefits of conservation easements and what you should know about purchasing an easement, or would like to request a speaker on this topic for your organization or event, contact one of our PYA executives below at (800) 270-9629.




Eric Elliott

Eric Elliott


Heather Martin

Heather Martin

Senior Manager

Related Posts
Medicare cards are getting a much-needed facelift.  The Centers for Medicare & Medicaid Services has announced its intention to remove Social Security numbers from the cards in an effort to...
Read More
Medicare card scam

New Medicare Cards in the Mail—Don’t Fall Prey to Scammers

The ink on the Tax Cuts and Jobs Act (TCJA), which swept in a tidal wave of changes to federal tax rules, had been dry for only seven weeks before...
Read More

New Budget Agreement Brings Additional Tax Changes

To help you organize and prioritize important 2018 deadlines, we’ve provided this summary of due dates for various tax-related forms, payments, and other actions.  Be aware that some deadlines have...
Read More

No Excuses—New Tax Deadlines You Need to Know

In the wake of passage of the Tax Cuts and Jobs Act (TCJA) late last year, the IRS has taken one of the first critical steps to institute the law’s...
Read More

IRS Issues Updated 2018 Withholding Tables

The Financial Accounting Standards Board (FASB) has set forth amended guidance aimed at simplifying and reclassifying certain features of financial instruments. Accounting Standards Update (ASU) No. 2017-11 – Earnings Per...
Read More

The Update on Down Round—FASB Reclassifies Earnings Per Share

Although the new tax reform was signed into law late 2017, the implications of that reform, now called the Tax Cuts and Jobs Act of 2017, won’t affect your 2017...
Read More

Tax Reform 2018

The new Tax Cuts and Jobs Act is bringing sweeping reform to the United States tax code. While recent tax reform has drawn considerable media attention to domestic corporate tax...
Read More

The Bottom Line: How Will Recent Tax Reform Impact You?

Most Americans are now aware that new tax reform legislation, titled the 2017 Tax Cuts and Jobs Act, was signed into law late last year. There has been significant news...
Read More

Excess Employee Compensation Under the New Tax Reform Law: Will Your Tax-Exempt Organization Be Affected?

A Section 83(b) election could be one of the biggest tax-saving decisions for taxpayers who receive equity subject to vesting. It is common for start-up founders and key employees to...
Read More

83(b) Election for Start-Up Founders

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop