Tax Deductions via Conservation Easements

Charitable contributions of conservation easements provide tax deductions to the contributors. They are a proven, effective way to provide for the public good by transferring properties into the public realm perpetually.

On December 30th Richard Rubin published an article in the Wall Street Journal about conservation easements primarily from the perspective of conservation easement abuse. He recognized that viable conservation easements do exist. However,  the purpose of his article was to outline abuse, as well he should.

The two primary areas of concern regarding conservation easement abuse include:

  • viability of the easement and
  • abusive land value appraisals.

Viability: Two important criteria for viability are: conveyance in perpetuity of a valid and valuable right, and a public benefit is gained from the conveyance.

Abusive appraisals: The IRS has well-defined rules for appraising conservation easements. The IRS will automatically red flag any conservation easement when the tax deduction is greater than 2.5 to 1. It is an attempt to curb overly aggressive appraisals which can be characterized as conservation easement abuse. Some sponsors are offering deductions as high as 5 to 1. It’s no wonder the IRS is actively seeking to curb such abuse.

As background, Congress uses the tax code to achieve its goals by encouraging investment in various sectors of the economy. Some examples are solar and wind credits, and conservation easements. Often, Congress rewards those who risk their capital with tax deductions and credits.

As part of my Strategic Tax Mitigation™ approach to financial planning, I use conservation easements where appropriate. The conservation easements with which I am familiar, from reputable sponsors, have deductions below the IRS investigation threshold. I also use a number of other sections of the tax code to provide tax benefits to my clients that ensures that they will only pay the minimum tax they are legally obligated to pay.

For a free tax-saving strategic plan, contact me at rboggess@irexa.net.

Learn more about Conservation Easements.  Review our 1031 exchange properties.