Land Preservation Opportunities
Here on Bald Head Island, there are two ways that individuals and families can preserve land for future generations: donation, and conservation easements. Donations and conservation easements offer both personal and financial benefits. Personally, the donor knows that the land will stay in its natural state for the enjoyment of future generations.
Other benefits to the donor include decreased tax burdens. Property taxes are either reduced or eliminated, and the value of the gift is removed from the amount subject to estate taxes, which start at 37% and rise to 55% on larger estates.
The third tax benefit is an income tax deduction for the fair market value of the gift as determined by a certified, unbiased appraiser. This deduction is taken on Schedule A, Itemized Deductions, as a charitable contribution. Details of the gift and information on the recipient organization and the appraiser are entered on form 8283, Non-cash Charitable Contributions. Total non-cash contributions are carried to Schedule A.
The IRS usually limits total charitable contributions to 30% of the adjusted gross income, but excesses can be carried forward for five additional years, with the 30% limitation each year. With marginal federal rates as high as 38.6%, state income taxes, and the estate tax bite, total tax savings can exceed the loss of value by granting an easement. Depending on the location of the property, North Carolina residents may be able to take a tax credit of 20% of the appraised value as a dollar-for-dollar reduction of the North Carolina tax liability. This credit can also be carried forward.
The conservation easement is then a permanent deed amendment on the property if sold. The IRS allows a tax deduction equal to the loss of value due to the restrictions, usually 60% to 80% of the fair market value. Unlike donation, a conservation easement allows the donor to retain ownership and pass the land to family members.
Donation is the simplest and most direct method of preserving land, but may not suit the donor's intent. While the income tax deduction is 100% of the fair market value, and property and estate taxes are completely eliminated, it does mean that the donor gives up control of the land, and the rights to sell, give, or will the property to others.
Here on Bald Head, the Smith Island Land Trust has recently accepted deeds on both donated and easement lots. In some cases, these lots were purchased to protect a view or to provide a privacy buffer for the donor's residence. Those functions can still be served while the Land Trust holds title or owns the deed restriction. The officers and staff of the Land Trust will be happy to answer any questions you may have, and help you through the process. Simply call the administrative office at 910.457.0089 for assistance.
Where else can you create a legacy, help the island you love, feel good about yourself, and save thousands in taxes!!??
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