A conservation easement can be a financial-planning tool to reduce taxes, a way to help landowners maintain the conservation values of the land in perpetuity and to obtain funding while retaining title to your property, without selling or mortgaging your land.  Not many people know about conservation easements and the benefits to the environment, tax benefits, and the potential for funding. We recommend that you talk to your financial adviser and accountant to understand how a conservation easement can benefit you.    

A conservation easement is a legally binding agreement between a willing landowner and a land trust or government and stays in place in perpetuity. The property owner retains the title of the property and the responsibility to pay property taxes and other expenses.  The conservation easement can protect wildlife habitat, scenic vistas, productive farmland, and important wetlands, watersheds, or forests. 

THE ALTRUISTIC GOALS:  Responsible landowners often think about the future of their land.  As people near retirement, more people are searching for ways to be able to afford to convey their cherished land to their heirs.  Some families want to preserve a working farm, ranch or forest in production, others want to preserve open space, protect watershed lands, wildlife habitat and places of scenic beauty. Properties near important waterways, natural lakes, or the ocean can help protect these water sources from pollution.

The conservation easement specifies what activities are allowed on the land, which may include farming, ranching, forestry, recreation, limited construction, and maintenance of existing property and structures.  A conservation easement also defines what activities are restricted permanently, such as development and subdividing, excessive grading, mining, logging, and other activities that would damage or eliminate the conservation values of the property.  The permanent protections of the conservation easement “run with the land” and remain in place in perpetuity, even if the easement donor sells or conveys title to the land or the property is inherited.

TAX BENEFITS: There are three potential tax reduction benefits: Federal income taxes, a potential reduction in estate taxes, and in some locations, property taxes.  As with any charitable gift, the donor may be able to take a federal income-tax deduction for a donation. 

Conservation easements can provide income-tax write-offs on federal income taxes and reduce the value of the land to keep the total estate below the estate-tax limit, which is $12.9 million for 2023.  Some local governments may also reduce the property taxes for the property because the value of the land is reduced due to the conservation easement. 

THE FUNDING POTENTIAL: Landowners can be paid for conservation easements by working with a non-profit organization qualified to hold conservation easements or a state or county government to apply for funding from the 2% Land Fund, several US Department of Agriculture Funding sources, and the State of Hawaii Legacy Lands.  By placing a conservation easement on a property, a landowner retains title, but relinquishes their right to subdivide their land in order to protect specific natural, scenic, farming, ranching, water rights or other resources.    The landowner continues to own and manage the land and continues to pay all the same costs of ownership, including property taxes.

The income tax benefit and the value of the conservation easement  are established by obtaining two appraisals.  The first appraisal is the fair market value, in other words, if the property were listed for its highest and best use and were sold through a real estate broker on the open market, what the sales price would be. The second appraisal is the value of the land with the conservation easement in place which limits the uses of the land.   If you subtract the second appraisal amount from the first appraisal amount, that is the value of the conservation easement that can be deducted against regular income on income taxes.

A conservation-easement donation requires a willing donor and a qualified conservation organization to accept the donation. That organization needs to be able to show that the donation closely fits its charitable mission and their 501(c)(3) designation.

Every easement is tailored to suit the goals of the landowner to preserve the conservation values of the property. As an example, most conservation easements limit development and to protect endangered or threatened wildlife habitat, while a conservation easement on a farm might allow continued farming and the building of necessary agricultural structures.

For more information contact Debbie Hecht at hecht.deb@gmail.com. I have worked in land conservation for 30 years and was a licensed real estate broker in Arizona selling land and apartment buildings.