Would you be surprised to learn Congress has made it possible for you to pay no federal income tax for the next 16 years?
If at least half of your income in 2011 comes from farming, ranching or timber production, consider yourself surprised. In December 2010, Congress extended a tax break that allows farmers who agree to protect their environmentally valuable land from development to potentially pay no taxes for the next 16 years.
Here is how it works:
Let’s say you own 200 acres with a conservation value of $5,000 per acre, or $1 million in all. Your 2011 income is $100,000 and at least half of it comes from farming.
After you place a conservation easement on your land, the Internal Revenue Service allows you to subtract the conservation value from your income, taking your income all the way down to zero. So in this case, you subtract $1 million (the conservation value of your land) from your 2011 income of $100,000, resulting in no income and therefore no income tax.
The IRS also allows you to carry forward the unused $900,000, so you can do the same thing again and again until the conservation easement value is used up, or 16 years has passed, whichever comes first. In this case, you would use $100,000 per year against your income for 10 years. You would pay no income tax for the next decade.
Surprisingly, this deduction is available not just against farm income but against all income. In fact, even if you never have farm income again, you may continue to zero out your taxable income for up to 16 years.
You might expect that if Congress is willing to allow you to pay no income tax for the next 16 years if you put a conservation easement on your land, that a conservation easement must be a pretty complicated thing. Again, you might be surprised.
A conservation easement can be nothing more than an agreement that your land may never be developed into a subdivision. You may still use the land for a home — even two or three homes — and any farm buildings you find necessary.
Additionally, to qualify for this program, the property must be always available for agricultural use. Other than that, you may continue to farm the land, grow timber on it and even hunt and fish on the property. Nobody other than you has any right of access to it. You may sell the land or pass it down to the next generation. But the land will be forever protected from certain uses such as subdivision development.
If this sounds too good to be true and you are looking for the catch, here it is: Congress made this available only until Dec. 31. In order to qualify, you must execute your conservation easement by the end of the year.
That is where the Georgia Conservancy comes in. The group’s team of experts can help you every step of the way with the process of protecting your land with a conservation easement, even helping you fill out paperwork. The organization offers this service for free to those who wish to protect their land.
The Georgia Conservancy is a nonprofit organization that works to protect the state’s natural environment by advocating for sound environmental policies, advancing sustainable growth practices and facilitating common ground solutions to environmental challenges.
Contact Fuller Callaway and Shannon Mayfield at (404) 876-2900, extension 113, or send an email to fcallaway@gaconservancy.org or smayfield@gaconservancy.org.
