To get tax benefits from a conservation easement, you donate property development rights to an appropriate charity, usually a local government or preservation group. This donation reduces the value of your property, so it can be taken as a charitable deduction on Schedule A of your tax return.
Suppose you own 10 acres of land behind your home. In your area, development of condos is proceeding at a rapid pace. To preserve open space and prevent over-development, you donate an easement to a local land trust. This easement, binding on you and on future owners, prohibits further development on the property.
Say a qualified, unrelated party appraises your property as being worth $500,000 million before the easement was donated. After the easement, your property is worth only $400,000, because development potential have been reduced. Thus, your property has lost $100,000 in value.
If so, the $100,000 loss of value can be taken as a charitable deduction. Tax code rules restrict the amount of donations you can deduct in one year but unused deductions can be taken over the next five years.