If I donate an easement, what are the tax benefits?
A gift of a conservation easement frequently benefits a landowner by permanently protecting the important conservation qualities of the property without the landowner having to give up ownership, and by creating immediate tax advantages.
Easements that are (1) permanent, (2) donated by the landowner (or subject to a qualified bargain sale), and (3) provide one or more conservation values for public benefit typically qualify for tax benefits offered by the Internal Revenue Code and the Colorado Department of Revenue. The two main tax benefits associated with a donated conservation easement are income tax benefits and estate tax benefits. An independent appraisal, conducted by a qualified appraiser, of the value of the easement determines the extent of the tax benefits.
To qualify for a deduction, the agreement must be properly structured and must provide significant benefit to the public by satisfying one or more recognized ‘conservation purpose’ as defined by Internal Revenue Code Section 170H. These are:
- the preservation of land areas for outdoor recreation by, or the education of, the general public
- the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem
- the preservation of open space (including farmland and forest land) where such preservation is for the scenic enjoyment of the general public or pursuant to clearly delineated Federal, State or local government conservation policy and will yield a significant public benefit
- the preservation of an historically important land area or a certified historic structure