PACE Program - Tax Advantages

Landowners may donate a conservation easement, which is a tax-deductible, charitable gift, provided the easement is perpetual and donated exclusively for conservation purposes. Conservation purposes include preserving open space and farmland.

With the passage of Middle Class Tax Relief Act, H.R.4853, in December 2010, some tax benefits that had previously expired were reinstated.  Particularly, the deduction can amount to 50% of your adjusted gross income (up from 30%) and can be 100% if the majority of your income came from farming, ranching, or forestry.  Additionally, the deductions can be taken over a period of 16 years (up from 6).  It is important to note that the current reinstatement of the above mentioned deduction constraints is only current for the 2011 calendar year.  Landowners must conplete the easement process by December 31, 2011.  PACE encourages interested parties to begin the process no later than July 2011to allow sufficient time to complete the process.

The example below demonstrates possible tax benefits of donating a conservation easement.

The landowner is eligible to deduct an amount equal to 50% of adjusted gross income each year for a total of 16 years or until matching the value of the gift.

For the purposes of this example, the landowner has an annual federal adjusted gross income of $100,000. Therefore, the landowner may deduct $50,000 a year for the next sixteen years if the income does not change.

Five years at $50,000 amounts to a $250,000 total federal tax deduction; the sixth year would realize the remaining $10,000 deduction.

NOTE: State income tax deductions for charitable gifts follow the same guidelines as for federal tax deductions. Thus, the potential state tax deduction is an additional $260,000.

Individual tax situations differ: therefore, you should seek legal counsel for specific details. Tax professionals can refer to Section 170 of the Internal Revenue Code.