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Enhanced Federal Tax Incentives Extended Through 2013
In January 2013, Congress extended the enhanced federal tax deduction for the donation of a conservation easement through the end of 2013.
- Raises the deduction a donor can take for donating a conservation easement from 30 percent of the taxpayer’s adjusted gross income to 50 percent
- Allows qualifying farmers and ranchers to claim the deduction up to 100% of their adjusted gross income
- Extends the carry-forward period for a donor to apply the tax deduction from 5 to 15 years
- Expires on 12/31/13—the donation must occur on or before this date. After this date, the percentage cap and the carry-forward period shrink to 30% and 5 years, respectively.
How Does it Work?
- Under previous rules, a landowner having an adjusted gross income (AGI) of $50,000 a year who donated a $1 million conservation easement could claim a $15,000 personal income tax deduction for the year of the donation and for an additional 5 years—a total of $90,000 in tax deductions
- The new rules allow that landowner to deduct $25,000 in the year of the deduction and carry forward the unused amount of the deduction for an additional 15 years. Assuming that the landowner’s AGI remains constant for the entire 16 years, that’s a total of $400,000 in deductions
- If the same landowner qualifies as a farmer or rancher, she could claim a maximum of $800,000 in deductions for her million-dollar gift, again assuming the farmer’s AGI remains constant