How Do I Claim My Conservation Easement Deduction?

Claiming a tax deduction for your conservation easement comes with its own set of specific rules—and the first involves your appraisal.

If your donation is more than $5,000, the IRS will require you to have a qualified appraisal. If it’s more than $500,000, the appraisal must be attached to your tax return. In either case, your appraisal must be done no more than 60 days before the donation and no later than the filing of your tax return. The appraisal must include:

  • A detailed description of the property
  • The property’s physical condition
  • The date or expected date of your donation
  • The terms of any agreement relating to the property’s use, sale or other disposition
  • The appraiser’s name, address, and taxpayer identification number
  • The qualifications of the appraiser, including background experience, education, and membership in professional appraisal associations
  • A statement that the appraisal was performed for income tax purposes
  • The date the property was appraised
  • The appraised fair market value of the property on the date of the donation
  • The method the appraiser used to determine the fair market value
  • The specific basis for the valuation, such as specific comparable sales

The IRS also requires correct and comprehensive documentation. You should provide:

  • A filed IRS form 8283
  • A Supplemental Statement detailing the conservation purpose of the donation
  • A copy of the recorded easement
  • A complete baseline inventory
  • A correct mortgage subordination, which is an agreement with the holder of your mortgage that enables the easement to survive a foreclosure or other mortgage-related issue
  • A written acknowledgement, which is a letter from the organization receiving your easement saying that they accept the gift and that you did not receive goods or services in exchange for the easement

Failing to include everything that’s required could leave you without a tax deduction, because the IRS can choose to deny it. But if you follow the rules and provide the correct documentation, you’ll be well on your way to your deduction—and better prepared for any changes or challenges that may arise.

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