What are the potential income tax benefits of donating a preservation agreement?
Under the Internal Revenue Code, qualified preservation agreement donations may be treated as charitable gifts for federal income tax purposes. The value of the gift can then be deducted at an amount up to 30% of the donor’s adjusted gross income (AGI) in the year of the gift. If the easement value exceeds 30% of the donor’s income, the excess can be carried forward and deducted (subject to the 30% limit) in each of the five succeeding tax years. Example: Joe and Mary Smith donate a preservation agreement on a 150 acre undeveloped woodlot to the Saginaw Basin Land Conservancy. The value of the easement is determined to be $135,000. If their AGI in the year of the donation is $100,000, they would be able to deduct $30,000 (30% of $100,000) in the first year. Since the value of the easement is greater than their allowable deduction, the Smiths would also be able to deduct $30,000 in each of the next three years — assuming their income stays the same – and $15,000 the fourth year in orde
