Qualified Conservation Contributions (Easements)
The Protecting Americans from Tax Hikes Act of 2015 made this provision permanent. The 30% of AGI limitation that generally applies to contributions of capital gain property is raised to 50% of AGI for qualified conservation contributions (easements), and the carryover period is increased to 15 years if the conservation easement contribution exceeds the 50% limitation.
Further, if the donor is a qualified farmer or rancher, the 50% limitation is increased to 100%. However, for any contribution of property made after August 17, 2006, that is used or available for use in agriculture or livestock production, the 100% limitation applies only if the contribution is subject to a restriction that the property remains available for agriculture or livestock production. If there is no such restriction, the 50% limitation applies. For this purpose, a qualified farmer or rancher is a taxpayer with gross farming or ranching business income that is greater than 50% of total gross income for the year. See IRS Notice 2007-50 for further details.
Example 1 – Non-Farmer Donor: In 2019 a taxpayer who is not a farmer or rancher contributes $70,000 to his church (qualifies for the 60% limitation) and in the same year makes a qualified conservation easement donation with a fair market value of $80,000. His AGI is $100,000. He is allowed to deduct $60,000 of the cash contributions, with the unused $10,000 carried forward for up to 5 years. None of the qualified conservation contribution is deductible in the donation year because contributions other than the conservation easement must be used first toward the 60% limitation, but the entire $80,000 qualified conservation contribution is carried forward for up to 15 years.
-
Note: For 2020 and 2021 itemizers were allowed a 100% of AGI limitation for cash contributions but could have elected the 60% of AGI limitation for cash contributions if they wished. When using the 100% of AGI limitation, the taxpayer’s other contributions, in this case the qualified conservation contribution, are figured first up to the 60% of AGI limitation and then cash contributions are allowed above those limits up to 100% of AGI. The normal 5-year carryover applies to any excess over 100% of AGI. Thus, if the scenario in Example 1 took place in 2021 rather than 2019, and the 100% of AGI limitation was used, first the qualified conservation contribution would be allowed up to 50% of the AGI, or $50,000, and the balance of $30,000 is carried over for 15 years. For the cash contributions, the balance of the AGI ($100,000 - $50,000) would allow $50,000 of the church contribution to be deducted and the remaining $20,000 carried over for 5 years.
Example 2 – Farmer Donor: Using the same facts as in Example 1, except that the donation year is 2021 and the donor is a qualified farmer, the deduction in the donation year will be $100,000: $80,000 (all) of the qualified conservation contribution plus $20,000 of the cash contributions. The unused $50,000 of the cash contributions carries forward for up to 5 years and there is no carryover of the qualified conservation contribution.
-