Tax breaks offered for farm and open space preservation
Farmers interested in keeping their land open and available for agriculture may be able to take advantage of significant federal tax incentives for placing a conservation easement on their property.
A conservation easement is a voluntary written agreement between a landowner and a qualified conservation organization in which the landowner agrees to keep the land in its natural state, and the organization is given the right to monitor the property to make sure the agreement is upheld.
The landowner still retains ownership of the land and can sustainably farm it as before. The easement assures protection against development and may offer the landowner tax savings.
While conservation easements have historically provided financial relief for farmers, the passage of a new federal law has greatly increased the tax benefits to their largest amounts to date.
On Aug. 17, President George Bush signed into law a bill that expands federal tax incentives for conservation easement donations with these changes:
Qualifying farmers and ranchers can now deduct up to 100 percent of their annual income;
To qualify, farmers or ranchers must earn more than 50 percent of their gross income from the business of farming in the taxable year in which the conservation easement is donated. The 100 percent deductible rule also applies to farmers and ranchers who operate as a corporation.
Second, the property must be used or available for use for agriculture or livestock production, and remain available for agriculture or livestock production after implementing the conservation easement.
Farmers and ranchers who do not qualify for the 100 percent deduction may still benefit from the expanded charitable deduction for landowners.
The rate of charitable deduction landowners can take for donations of conservation agreements has been increased from 30 percent of their annual income to 50 percent.
The time period for which qualified donors can take tax deductions increased from six to 16 years.
These changes apply only to easements in 2006 and 2007. Therefore, there is a narrow window of opportunity to take advantage of these tax incentives. To qualify for these tax benefits, projects must be completed prior to Dec. 31, 2007.
“This is a tremendous opportunity for people who love their family land and want to keep owning and farming it,” said Reid Wilson, executive director of the Conservation Trust for North Carolina, the service center for 23 local land trusts. “For individuals who are considering preserving their land through conservation easements, now is the time to do it.”
Go to www.ctnc.org to find your local land trust.
For more, contact The Conservation Trust for North Carolina at (919) 828-4199, or Gerry Cohn, American Farmland Trust, at (336) 221-0707 or www.farmland.org.