Did you know that now is a great time to make money on your land without having to sell or divide it? Contrary to what we all hear on the nightly news, your land can still put money in your pocket – no matter what is happening with condominiums in Las Vegas or Miami.
Landowners who voluntarily restrict subdivision development continue to own the land, with all the rights of privacy that they have always enjoyed. They may still hunt it and fish it or farm it, as well as hike and boat it. The only thing they cannot do is cut it up into a neighborhood, or build a lot of additional houses on it.
The vehicle used to protect land and reward land owners is known as a conservation easement. Many landowners already participate in a county program that, for a 10-year enrollment, provides protection from rising property taxes. A permanent conservation easement is much more valuable to a landowner.
Owners of marshy bottomlands or swamps may qualify for federal funding that seeks to protect wetlands. Owners of pasture may qualify for federal funding that seeks to protect grasslands. Farmers and ranchers may qualify for federal funding which seeks to protect and preserve family farms which have important soil types. In these cases, the government will make a lump sum payment to the landowner for agreeing to protect the land from development.
Many other landowners will qualify for state or federal programs that will provide payments for improving habitat for certain species of animals, or planting certain kinds of trees – like the native longleaf pine.
Let’s say you want to donate $10,000 to your favorite charity, and you own an acre of land that is worth $11,000. If you give the charity a check for $10,000, then the IRS allows you to pretend you never received that income in the first place and you do not have to pay taxes on the $10,000. If the tax rate is 40 percent, you just saved $4,000.
But the IRS does not require that you give cash to get that savings. What if you wanted to donate the acre of land itself? The IRS allows this, generally, provided you demonstrate by an appraisal that the value of the land is actually $10,000. You save $4,000.
What if most of the value of the land is for building a house? And what if you gave that right to build away via conservation easement? Then you must get an appraisal to determine how much the right to build that you gave away was worth.
Let’s say the land doesn’t have much market value if it cannot be built upon. The value of what you gave away might actually be most of the value, let’s say it is $10,000. You get the same deduction as if you had given $10,000 in cash or had given away the land completely. Only now you still own the land: you can hunt, fish, hike, play and farm it, and keep out anyone you don’t want in. And you still save the same $4,000.
The average American will save about $4,000 in actual tax dollars for every $10,000 donation he or she makes. When you think about it this way, if you protect your land by a conservation easement that is valued at $50,000, you will keep an extra $20,000 in your pocket.
These are simple examples and general statements, but the basic logic remains the same when the number of acres and dollars increase. If you would be interested in finding out whether your land qualifies for a lump sum government purchase of an easement, or how doing an easement for your own tax savings, shielding up to 50 percent of your income from taxation each year, would work in your particular circumstances, please call Shannon Mayfield or Fuller Callaway at the Georgia Conservancy, (404) 876-2900 or e-mail smayfield@GAconservancy.
The Georgia Conservancy is a nonprofit organization dedicated to building a Georgia where people and the environment thrive.
Callaway is with the Georgia Conservancy Land Conservation Program.