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A Deduction for Doing Nothing

It may sound too good to be true, but there is actually a tax deduction available for “doing nothing.”  It’s called a conservation easement and, depending on whether the gift is during life or at death, there can be either an income tax or an estate tax charitable deduction.

With a gift of a conservation easement, the owner of the land typically gives up the development rights to the property.  The gift can be for a scenic easement to preserve the view for the general public or an easement that protects a fragile or endangered habitat.  The amount of the deduction is generally the difference between the value of the land without the easement and the value following the gift.  A conservation easement must be in perpetuity and must be granted to a qualified charity that can enforce the restrictions.

Granting an easement doesn’t necessarily mean that the owner can’t continue using the property.  For example, the easement can provide that the owner will not build more than a specified number of buildings on the land or will use the land only for a particular purpose, such as for agriculture.  An easement can also apply to only a portion of an owner’s entire parcel.

Not only is a tax deduction available for giving up the development rights to the land, but there may also be a reduction in property taxes as a result.



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