New legislation signed by President Bush in August increases income tax deductions for donors qualified conservation easements. The new law allows donors to deduct up to 50% (formerly 30%) of their adjusted gross income for the lesser of a period of 15 years (formerly six years) or until the value of the conservation easement is exhausted.
While conservation easements have always been beneficial to the wealthy, the new laws make them attractive to donors in lower income brackets as well. For example, a donor with adjusted gross income of $50,000 who donates land as a qualified conservation easement valued at $500,000, would be entitled to a $25,000 income tax deduction for 15 years. For illustration purposes, assuming the donor’s adjusted gross income remains steady at $50,000, the donor could deduct $25,000 for 15 years equating to a $375,000 deduction. Under the old rules, the donor would only be able to deduct 30% of his adjusted gross income ($15,000) over six years equating to a $90,000 deduction, leaving a $410,000 differential.
Farmers and ranchers may enjoy an even sweeter deal – if they meet requirements (including earning more than half of their income from agricultural pursuits), they can deduct up to 100% of their adjusted gross income.
Those interested in donating should act quickly because, in order to qualify for the new rules, transactions must be completed prior to the end of 2007.