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--Income Tax Benefits
--Estate and Inheritance Tax Benefits
--Pop-up Tax Eliminated for Properties with Conservation Easements.
--Can I Reduce my Property Taxes?
Interest in conservation easements has grown with the extreme increases in property values in many parts of the country. The resulting increased tax burden created some rather valuable estates that are "cash poor, but land rich." This shortage of cash sometimes means that even landowners who wish to preserve undeveloped land may have to sell or subdivide their land to pay the taxes. In addition to the payment of property taxes, estate taxes can be of particular concern. Since federal estate taxes are due within nine months of death, heirs have been forced to sell land to pay the inheritance taxes on it. Conservation easements are a tool which may help many landowners preserve their property intact.
NOTE: Landowners are advised to seek professional counsel to determine the possible legal and tax benefits available by donating a conservation easement.
New Legislation for easements donated in 2006-2007
Recently Passed Legislation Offers the Following New Land Conservation Tax Benefits for Landowners, especially Farmers and Ranchers:
- Raises the deduction a donor can take for donating a conservation easement from 30% of their adjusted gross income in any year to 50%
- Allows qualifying farmers and ranchers to deduct up to 100% of their income, provided the land remains available for agriculture production.
- Increases the number of years over which a donor can take deductions from 5 to 15 years.
- Only applies to easements donated in 2006-2007, including bargain sales.
Theses Tax benefits, the most sweeping changes to conservation tax law in two decades, offer an unprecedented opportunity to conserve the lands we cherish and preserve America’s traditional land uses.
Estate and Inheritance Tax Benefits
Due to changing Estate Tax and Inheritance Tax laws, landowners are advised to consult their professional advisor.
Pop-up Tax Eliminated for Properties with Conservation Easements.
Under current Michigan law, the taxable value of a parcel of property may not increase from one year to the next by more than 5% or the increase in the consumer price index, whichever is lower, until there is a transfer of ownership. When the property is sold or transferred, the assessment is “uncapped” and the parcel is taxed upon its state equalized value (SEV: 50% of its true cash value). This reassessment upon transfer creates a “pop-up” property tax.
P.A. 446 (signed December 2006), eliminates the “pop-up” property tax on the transfer of lands enrolled in a voluntary conservation agreement (also known as “conservation easement”).1 The Act prevents the taxable value of conservation property form “popping-up” to the state equalized value when it is transferred.
Can I Reduce my Property Taxes?
Property values are assessed at the local level in Michigan. The State Department of Treasury has issued guidance to Assessors and Equalization Directors at each municipal level to recognize conservation easements when valuing property. It states that assessors should employ the “Before and After” method to determine taxable values of land with conservation easements.
Where do I go to learn more?
Chikaming Open Lands is a local conservation organization working with landowners in Berrien County.
Phone: 269-469-2330 Fax: 269-469-2471
Email:
NOTE: Landowners are advised to seek professional counsel to determine the possible legal and tax benefits available by donating a conservation easement.
[1] Residences and buildings on the lands are still subject to reassessment to the current SEV.
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