A conservation easement (CE) is a tool landowners can use to protect their land. It is a bespoke legal agreement between a landowner and a land trust (or other nonprofit conservation organization) that permanently limits a property’s uses in order to protect its conservation values.
When you own land, you also “own” certain property rights, including the right to subdivide and develop the property to the extent that local zoning regulations allow. When you donate a CE, you voluntarily give up some of those rights, either in part or in full.
When you donate a conservation easement, an appraiser determines the value of that charitable donation of property rights and its value may be deducted from your federal income taxes.
You and successive owners continue:
You can pass the property on to the next generation, sell it, trade it, mortgage it, etc – you retain all the rights of ownership, except those that you voluntarily donated in the CE.
Federal Income Tax Deduction:
The IRS tax code says the conservation easement donor can deduct 50% of his/her adjusted gross income on his/her annual tax returns for up to 16 years (or until the deduction is used up). A CE donor whose income is primarily from farming can deduct up to 100% of his/her adjust gross income.
Hypothetical Example: John Doe is considering putting 100 acres of his land under conservation easement. If the appraised value of the conservation easement is determined to be $800,000, then that’s the amount of his Federal income tax deduction. If John Doe’s adjusted gross income is $100,000, he will be able to deduct $50,000 per year, until the deduction is used up, which means that at the close of the 16 years he would have deducted the full $800,000.
SC State Tax Credits:
With a conservation easement donation, you also may qualify for SC Income Tax credits, which can be used to reduce your SC income taxes owed. Unlike federal deductions, these credits can be sold or transferred to another person and have a dollar-for-dollar value against taxes owed. SC Tax credits are calculated at $250 per acre or 25% of the easement value, whichever is lower. They never expire and can be used to reduce up to $52,500 of SC taxes owed each year.
Hypothetical Example: If John Doe donates an easement valued at $800,000 on 100 acres. He could thus receive up to $25,000 in SC tax credits.
Property Tax Reassessment:
The conservation easement reduces the value of the property. If this new appraised value is less than your local assessment for the value of your land, you can apply to your local assessor’s office to have the taxable value of your land reduced. This could result in reduced annual property taxes.
Hypothetical Example: John Doe’s easement dropped the value of his land from $1,600,000 to $800,000 on his 100 acres. The county had assessed his property value at $1,600,000 and charged him $7,000/yr in property tax. He successfully applies for a reassessment at the new $800,000 value and has his annual property tax bill reduced to $3,500/yr.
Estate Tax Reduction:
The estate tax burden for heirs is significantly reduced when the property has a conservation easement on it at the time of the landowner’s death. When there is a conservation easement on the property, not only are estate taxes reduced due to the lowered property value, but the heirs get to reduce the estate’s value by an additional 40% or $500,000, whichever is less, before the estate taxes are calculated. However, if this reduction is taken the basis does not step-up. The current estate tax exemption per individual roughly $13 million per individual.
Hypothetical Example:
| Original value of land/estate without CE | $ 1,600,000 |
| Reduced value of land with CE | $ 800,000 |
| Additional 40% reduction after death | $ -320,000 |
| Reduced taxable value of the estate after CE | $ 480,000 |
If you are financially unable to benefit from state or federal tax incentives or if you want to receive compensation for donating a conservation easement, then EIOLT has the ability to apply for public funds to purchase conservation easements. When purchasing a conservation easement, EIOLT can compensate the landowner for their closing costs and on average 30% of their conservation easement value. The remaining uncompensated CE value remains eligible for state and federal tax deductions.
Hypothetical Example:
| Value of Conservation Easement | $ 800,000 |
| Closing Costs Estimate | $ 15,000 |
| Grant Application amount | $ 255,000 |
| Remaining Charitable Donation | $ 545,000 |
There are two major sources of funding available to EIOLT, the Charleston County Greenbelt Program and the South Carolina Conservation Bank, as well as several more specific funding sources that special conservation projects may be eligible for.
Charleston County Greenbelt Program: The CCGB provides funding to purchase property and conservation easements in Charleston County for the purposes of conservation, open space, agricultural preservation, and public access.
South Carolina Conservation Bank: The SCCB provides funding to purchase property and conservation easements in South Carolina for the purposes of conservation, ecosystem services, agricultural preservation, and passive public recreation.
* EIOLT will be your partner and guide throughout the CE donation process. The process has numerous steps and usually takes a year or more to complete.
For more information on Conservation Easements and alternative methods for land protection contact EIOLT at the phone number or email below and view the additional reading at the links below
CALL EIOLT: (843) 869-9004.
EMAIL EIOLT: Land@edisto.org
Protecting the ACE: Conservation Easements, Grants, & Tax Deductions
Cash for Conservation! The Charleston County Greenbelt Program
