April 15 doesn't have to be painful again next year. Instead,
it can be a day you celebrate both your tax savings and the satisfaction of
permanently conserving important fish and wildlife habitat. The Alabama
Waterfowl Association, a non-profit organization that is independent of
government and works hand-in-hand with landowners who choose to conserve their
lands,
offers a variety of ways that you can permanently protect your land and perhaps
shave your tax bill. One can donate it to a land trust, 2) donate a conservation
easement, which permanently limits the type and scope of development or 3) sell
the land to a land trust in a "bargain sale" for below fair market
price.
According to Jerry Davis CEO of Alabama Waterfowl Association, "Under the Internal Revenue Code, for most gifts of appreciated land or conservation easements, a taxpayer can deduct up to 30 percent of his or her adjusted gross income in the year of the donation. If the value of the gift exceeds that deduction the taxpayer can carry forward the balance for up to five more years. For example, if a landowner has an adjusted gross income of $50,000 and makes a gift of a conservation easement worth $80,000, the deduction in the first year would be $15,000. The balance can then be carried forward for five years until the landowner deducted the full $80,000 value of the gift."
Because development pressures dramatically increased property values during the past 20 years, many people are forced to sell lands that have been in the family for generations to pay estate taxes. Consider The Stewart Place, a fictional working farm, but a true-to-life financial example. The family bought the farm in the early 1950s, when land was far less expensive. Today, it is worth $1,250,000. The current owner is a widow and the farm comprises nearly her whole estate. She and her husband accumulated just $250,000 in other assets. Therefore, her total estate is worth $1.5 million. The combined state and federal estate taxes are approximately $200,000 - more than the surviving children could afford to pay, even though they want to see the farm remain in the family and not used for development.
The solution may be the voluntary donation of a
conservation easement, which legally limits the amount and type of development
that can take place on land. An easement can be tailored to a landowner's
desires. The easement may, for example, permit construction of just two more
homes for each of the children but protect the land from construction of a
subdivision. As a result, the landowner may reduce the land's market value to
$750,000, down from its current $1,250,000 value. Her estate, including $250,000
in other assets, would then be worth $1 million, and no estate taxes would be
due," continued Cummins. The Alabama Waterfowl Association has been
very successful at land protection. For more information about conservation
easements and the Alabama Waterfowl Association. Check our website www.alabamawaterfowl.org
.