With tax season in full swing, landowners have several strategic options to help reduce their tax burden. I came across an article written by Bryce Berglund of National Land Realty dated February 21, 2025 where he outlines three key tax strategies for landowners: Depletable Basis Through Timber Sales, 1031 Exchange and Step-up Basis, and Conservation Easements. The first allows landowners who harvest timber to deduct their depletion basis, potentially lowering taxable income. The second strategy, a 1031 exchange, allows property owners to defer capital gains taxes by reinvesting proceeds into a like-kind property, while a step-up in basis can significantly reduce estate taxes for heirs.
However, one of the most powerful tools for landowners facing high tax liabilities is a conservation easement. This voluntary agreement restricts development on a property to preserve its natural or agricultural value while offering substantial tax benefits. By donating a conservation easement to a qualified organization, landowners may receive a charitable deduction based on the reduction in property value, because such value is diminished after the easement is placed due to the new restrictions imposed. This fair market value difference can offset a significant percentage of adjusted gross income up to 50% and carry forward for many years.
There’s also Fee Simple Donations which have gained popularity in recent years where the tax deduction amount is the entire fair market value of the land at the time of donation. This type of deduction however is limited to 30% of one’s Adjusted Gross Income and can carry over excess deductions for up to 5 years.
For those looking to protect their land while maximizing tax savings, a Conservation Easement or a Fee Simple Donation is a compelling option worth discussing with a tax professional. For more details on this subject, click on the link to the article below.
Source: https://nationalland.com/blog/3-tax-strategies-for-landowners/