Potential Tax Benefits of Conservation

The conservation easement value that is donated by the landowner can be taken as a charitable income tax deduction against federal income taxes. The federal charitable deduction for conservation easement donations may be used to offset up to 50% of taxable income and any unused portion of the donation can be carried forward and used during the next 15 years. It also means that farmers and ranchers may use the conservation easement deduction to offset their entire taxable income.

In Colorado, a landowner who files a Colorado income tax return can also claim a state tax credit on 75% of the first $100,000 in donated value and 50% of the remaining value up to a $1.5 million credit. Landowners may apply the credit to their own Colorado income taxes over a 20-year period, or transfer (sell for cash) some or all of the credit to another Colorado taxpayer. Colorado has a number of reputable tax credit brokers who facilitate the sale of these tax credits. It is typical for the credits to be sold at 85 cents per $1 of credit value.

A conservation easement may also decrease the value of your property for estate tax purposes, making it easier to transfer the land to your children, and for property tax purposes. If your property is taxed at an agricultural rate at the time the conservation easement is recorded, the easement ensures that it will perpetually remain classified as agricultural.