A Conservation Easement Can Provide Tax Benefits

Placing a conservation easement on your farm or ranch land can yield substantial income tax benefits

Photo by Michael Kora on Unsplash

Farmers and ranchers, many times would like to make sure that their land is available for farming or ranching for many generations. Placing a conservation easement on their property can achieve this goal and also generate some income tax savings.

Let’s review how this works.

The farmer or rancher usually finds some type of charity that is interested in making sure that the land is held only for farming or ranching purposes. In many cases, this may be a state that is interested in preserving farm or ranch land and is willing to provide cash consideration to help the farmer or rancher. Also, USDA has at least two programs that will pay farmers to put easements on their land.

If the farmer or rancher is simply placing a conservation easement on their property without any cash consideration, the income tax deduction is equal to the difference in fair market value for land with and without the conservation easement. The taxpayer will deduct other charitable deductions first and then the conservation easement deduction second. Here is an example: