TAX BENEFITS THAT APPLY TO CONSERVATION EASEMENTS
The principal benefit of a conservation easement is that it helps you conserve your land. But it can also relieve you of certain land taxes and income taxes, depending upon your particular circumstances.
When a conservation easement or other property is donated to a conservation charity such as ours, we will issue a tax receipt. You can then use the receipt to claim a credit (or a deduction for a company) to reduce your income tax. Under new tax rules, you can get full credit for a donated easement's value. You may be able to claim your donation against a larger portion of your income if an easement protects lands that qualify as "ecologically sensitive" under the federal Income Tax Act.
But how much is an easement worth in dollar terms as it relates to tax benefits?
Land and easement values vary greatly, depending on the location and the agreement's terms. Generally, in areas of more development pressure, the monetary value of the easement donation can be greater. If there are no comparable sales of easements nearby, these agreements will be valued at the difference between the land's value with, and without, the easement. In any case, a proper appraisal is usually required to get a tax receipt.
If a conservation easement's restrictions reduce the land's market value, this may also lower other land taxes. You might request that the property be reassessed at this lower value and thus be subject to lower property taxes. A lower property value would certainly decrease land transfer taxes upon sale and reduce any probate fees for transfers of property through a will.
Conservation easements also have value for the surrounding area. Protecting natural or cultural features helps maintain our local heritage – our natural resources, scenery and quality of life. A conservation easement may increase the value of nearby properties. An easement may also redirect or avoid development that would be very costly for a municipality and other agencies to service (with roads, sewers, school buses, etc.).
There may be additional tax benefits depending on the particular circumstances.
The tax receipt may be applicable against 100 per cent of annual income for up to ten years from the time of the donation.
A donation of land may be exempt from capital gains tax if it qualifies under Environment Canada's Ecological Gifts program.
Some conservation agreements may reduce property taxes paid on the land.
Conservation agreements often lower future transfer, probate and goods and services taxes.
With donor agreement, a gift of surplus land, cash, life insurance or other property could be used by the Land Trust to purchase and steward important conservation land.
Residents of the United States may be able to obtain U.S. tax benefits for gifts of significant properties situated in Canada.
Donation of securities provides a double benefit through a tax credit and an exemption on any associated capital gains tax.
The Land Trust can provide you with more information about conservation easements and the Ecogifts program. You are always encouraged to seek independent advice from your financial planner and other experts in order to assess your individual situation and what tax benefits you may realize from your properties and holdings.