Tax Deduction via Donation of Land


Real Estate Donation

A landowner may be interested in gifting a property to a charity or land trust.  When a charity or land trusts accepts a real estate donation, the landowner can deduct the fair market value of the land from his or her federal taxes. Depending on how long the landowner has held the property, deduction is capped at 30% (held for a year or more) or 50% (held for less than a year) of the adjusted gross income. Excess contributions can be carried forward for up to 5 tax years until the full contribution has been deducted. Ducks Unlimited‘s webpage, Deductions for Charitable Gifts of Real Property, discusses some of the nuances of real estate donation in more detail.

The best situation for a real estate donation is a debt free property that has appreciated in value since its acquisition and that does not have environmental issues.  However, a charity may also be interested in land that is not ecologically significant if the owner will allow it to be resold by the charity in order to purchase ecologically significant land elsewhere.

Charitable Remainder Trust

A charitable remainder trust may be of interest for the property owner who wants to make the donation for tax benefits, but wants to retain enjoyment and benefits of the property for the remainder of his or her life.

This type of donation results in an income or interest annually distributed to the landowner (or designated recipient) for an agreed period of time, with the remainder of value or interest being transferred to the charity at the end of the term.

Getting Started:

  • Consult with your tax adviser before beginning this process.
  • Review tax law related to real estate donations for tax deductions
    • The IRS Publication 526: Charitable Contributions For use in preparing 2014 Returns discusses charitable deductions
  • The landowner should research and meet with land trusts.
    • When a land trust is selected to hold the conservation easement, that entity will guide and assist the landowner through the process.

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