If you have development rights to give away, you may be
able to donate a conservation easement to a local
government or a qualified not-for-profit conservation
group. The rights must be substantial enough so that a
qualified recipient will accept the easement and agree
to monitor the restriction. This easement will
permanently restrict future development on your property
but also result in substantial tax breaks.
Conservation easements may be most valuable if you own
rural or semi-rural property. Say you own a 10-acre parcel
of land 20 miles from a major city, in the path of
development. (In the right place, a homeowner with a
couple of acres may have potential development rights to
be given away.) You agree to donate an easement that would
prohibit commercial or industrial development while
restricting residential use.
Before donating your easement, your 10-acre property is
appraised by an unrelated party at $100,000. Afterwards,
the value is set at $60,000. In this example, the $40,000
loss of value can be taken as a charitable deduction. Such
charitable contribution deductions usually are limited to
30 percent of your adjusted gross income, with any excess
carried forward up to five years.
