Cash for Conservation
Virginia rewards landowners who want to conserve their land
by allowing them to turn 50 percent of the value of a conservation
easement into cash. Farmers or other landowners who create a
conservation easement receive state income tax credits that they
can use themselves or sell for cash. These credits can total
thousands of dollars and be used over six years. For land-rich
and cash-poor farmers, this can make a conservation easement
a smart financial move.
Landowners should be able to sell their tax credits for 70 cents
on the dollar through a broker or up to 80 to 85 cents through
their own personal contacts. Landowners also receive federal
and state income-tax deductions as well as significant estate
tax benefits.
A Summary of Tax Advantages
A conservation easement can save a landowner thousands of dollars
in taxes as well as generate cash from the sale of tax credits.
You still own your farm and can continue all its traditional
uses.
I. State tax credit = Cash
Virginia gives landowners who donate a conservation easement
a tax credit worth 50 percent of the easement’s value—usually
thousands of dollars. (The value of a conservation easement
is the difference between the land’s value
with all its development rights and its value after most
development rights are removed.)
The landowner can use the credit to reduce or eliminate state
income taxes over six years. Or this credit can be sold for
cash. This can be an enormous benefit to landowners with a
small state tax liability. Brokers will purchase these credits
at approximately 70 cents on the dollar to re-sell to other
Virginia taxpayers. A landowner can also recruit buyers at
80 or 85 cents on the dollar.
II. State and federal income tax deductions
Landowners also qualify for state and federal charitable deductions
for the value of their donated easement. The landowner can
apply this deduction to reduce the amount of income on which
he pays taxes by up to 30 percent each year for six years.
III.
Estate taxes
It doesn’t take much land these days to bump
into the $1.5 million inheritance tax ceiling. A conservation
easement can dramatically lower the value of a farm and shrink
or even eliminate inheritance taxes. In addition, the IRS exempts
from inheritance taxes 40 percent of the remaining value of
land under easement up to a limit of $500,000.
To learn more about conservation easements, contact Elizabeth
Obenshain, Executive Director, (540) 951-1704, e-mail: nrlt@newriverlandtrust.org |
