Tax Considerations for Landowners
Summary of Tax Benefits Available to Individual NC Landowners
The individual donor of qualifying conservation land or a conservation easement may claim the value of his/her gift as a deduction on his/her federal income tax form if the value of that donation is determined by a qualified appraisal. Certain other estate and gift tax benefits may apply. Details of these benefits are specific to each individual and should be discussed with your financial consultant, accountant or tax advisor.
Federal Income Tax Incentives
Donations of land and conservation easements and sales of land or conservation easements at below fair market value (“bargain sale”) that qualify under Section 170(h) of the Internal Revenue Code as conservation contributions to qualified holders (such as PLC, the state and local municipalities and certain other non-profit organizations) are deductible as charitable contributions. The federal tax code limits the amount of the deduction that can be claimed in the year of the gift to 30% of an individual’s adjusted gross income (AGI). Any portion of the deduction not allowed in the year of the gift can be carried forward for five years and claimed as a deduction in each of those years subject to the same 30% AGI limitation. Read more on how to determine the amount of a federal income tax deduction that may be available to you.
North Carolina Income Tax Incentives
The North Carolina Conservation Tax Credit program, which allowed a landowner to apply for a State income tax credit equal to 25% of the fair market value of the donated property interest, was eliminated as of December 31, 2013, by State Law 2013-316.
Estate and Inheritance Tax Incentives
Donations or bargain sales of conservation easements can serve as important estate planning tools. Landowners who donate or make a bargain sale of a conservation easement can reduce estate and inheritance taxes by reducing the value of property they hold. Life estate, charitable remainder trusts, bequests by will and other methods provide a variety of options for landowners to reduce estate and inheritance taxes.
Local Property Tax Incentives
North Carolina requires county tax assessors to consider the effect a conservation easement has on the value of property subject to the easement when assessing ad valorem taxes on that land. The effect a conservation easement will have on the county property taxes due will depend on the terms of the easement and the tax assessor’s determination of the value of the land. If land is already in a deferred tax program and is being taxed at its present use value, such as farm land or land managed for timber production, it is unlikely that a conservation easement will reduce property taxes.
If you have any questions regarding this information, please contact Piedmont Land Conservancy at (336) 691-0088.