Farmers donating land for tax write off

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Farmers donating land for tax write off

Farmers have 3 options to donate land for a tax deduction.

  1. Conservation easement 
  2. Bargain sale
  3. Donating the farm

Below is an explanation of each option:

What is conservation easement?

It’s a tax easement provided to farm landowners who agree to restrict how their land or buildings are used. 

Who qualifies for a conservation easement?

The tax break is given to people who qualify within federal, state or local government rules for conservation of land. 

What does a farmer get out of it?

Farmers can claim 100% income tax deduction for 16 years.

Resources

What is a bargain sale?

The donor sells the farm to a charity for less than the farm’s fair market value.

As the donor, you are taxed on your gain and may claim a tax deduction equal to the difference between the farms fair market value and its selling price.

Donating the farm

For someone who is not interested in the business anymore or wants to get rid of the land, this could be a great option. 

By donating the farm to charity, you avoid paying capital gains tax, you can carry over your tax deduction for 5 years and the charity will handle everything for you.

By donating the farm, not only do you get 100% of the tax write off against the current value of your property but you also forfeit all costs and expenses to do with selling the property and maintaining it. 

Additional resources