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Permanent conservation easements- tax question

IowaBowHunter1983

IowaBowHunter1983

Well-Known Member
Staff member
Are permanent conservation easements (ie WRP) considered taxable income?

You're talking hundreds of thousands of dollars potentially. I can't seem to find anything online.
 
A 1031 might be an option, there are ways to offset taxes. I’m no expert, but we did a RIM easement in Minnesota and the taxes were not bad at all .
 
A permanent easement will be taxed as a long-term capital gain (instead of ordinary income). You can also use the basis in the farm to offset the income.
 
Don't forget the restoration cost. You want the nrcs to do all the restoration. If you do it, then you will be taxed on that also.
It is a great program for wildlife. Don't let the red tape scare ya.
 
Duckriver said:
Don't forget the restoration cost. You want the nrcs to do all the restoration. If you do it, then you will be taxed on that also.
It is a great program for wildlife. Don't let the red tape scare ya.
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I just used WRP as an example. Not considering that one.... people are just familiar with it. Was actually looking at ALE program (ag land easement) It's never been done in my county. Basically my farm can function as it does now with no changes. Just prohibits future development. Forever. Which I'm totally ok with.
 
IowaBowHunter1983 said:
I just used WRP as an example. Not considering that one.... people are just familiar with it. Was actually looking at ALE program (ag land easement) It's never been done in my county. Basically my farm can function as it does now with no changes. Just prohibits future development. Forever. Which I'm totally ok with.
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Your correct ALE is a great option. Just need that eligible partner to sponsor the project. That is most common holdup that I run into when folks are looking to apply.
 
Duckriver said:
Your correct ALE is a great option. Just need that eligible partner to sponsor the project. That is most common holdup that I run into when folks are looking to apply.
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Have you administrated any? I can't get an answer or example from NRCS on the financial end. I been trying to find some case studies. Like is it $500 per acre or several thousand. I know it's delta between appraised value before and after easement. Has to be some examples out there. Just trying to see how much effort to potentially put into it.
 
You nailed it... it's the difference of value without easement vs with easement. That is determined by an appraisal. Each parcel is different. But I typically see them range from $1200 to $4500 / ac.
No one will know the value until the appraisal is done. That is done at no cost to you, once you and the partner that is sponsor is eligible. If you don't like the appraisal value, you can walk away.
If you haven't talk to hannah.grimm@usda.gov then I suggest an email. She should be able to help. She is the easement program manager in Iowa.
 
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