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
The new Tax Cuts and Jobs Act (TCJA) can be confusing for many-- especially small business owners.  Although many aspects of the TCJA have been discussed, one component of the...
Read More

Government Clamps Down on “Deductible Fun” for Businesses

As businesses consider the impact of the Tax Cuts and Jobs Act (TCJA) introduced late last year, the corporate tax rate is receiving substantial attention.  However, according to a 2014...
Read More

2018 Tax Reform – The Excess Loss Limitation Likely to Squeeze Owners of Cyclical Businesses

A recent Accounting Standards Update (ASU) addresses land easements and their accounting under the new lease standards.  In January 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-01 Leases:...
Read More

Land Easements—Guidance for Implementing New Lease Accounting Standards

According to its tagline, Atlanta Business RadioX spotlights “the city’s best businesses and the people who lead them.”   PYA is pleased to share that one of its own, Consulting Principal...
Read More

PYA’s Lori Foley Shared Insight in Live Radio Interview

Many Americans have a 401(k) retirement savings plan as a benefit of employment with their employers.  They contribute a percentage of their compensation to their 401(k) each pay period with...
Read More

Taking Distributions from Your 401(k): What You Need to Know

The recent Tax Cuts and Jobs Act (TCJA) imposes a limit on deductions for business interest for taxable years beginning in 2018.  The limit, like other aspects of the law,...
Read More

IRS Sheds Light on New Limit on Business Interest Expense Deductions

The Tax Cuts and Jobs Act (TCJA) of 2017 brings sweeping changes for many businesses. Along with a reduced corporate tax rate and the elimination of the Alternative Minimum Tax...
Read More

Looking Ahead: Net Operating Loss Rules under the New Tax Act

Are you feeling unease about the impending Tuesday, April 17 tax filing deadline? Fear not –the Internal Revenue Service (IRS) permits a taxpayer to file an extension to allow time...
Read More

The Tax Deadline Looms: Need More Time?

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

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