Land Donation Tax Deduction: AGI Limits, Appraisals, and Carryover

A land donation tax deduction lets you claim a federal charitable deduction equal to the fair market value of land, or of a permanent conservation easement on land, that you give to a qualifying charity or government unit. The deduction is generally capped at 50% of your adjusted gross income each year, with any unused amount carrying forward for up to 15 years. Qualified farmers and ranchers can deduct up to 100% of AGI. You have to itemize on Schedule A to get any of it, so the deduction only helps if your itemized total beats the standard deduction for your filing status.

The rules live in Internal Revenue Code Section 170(h), and every requirement in that section has to be satisfied. Miss one, and the whole deduction can disappear on audit.

What Counts as a Qualifying Donation

Section 170(h) recognizes a “qualified conservation contribution” only when three things line up: a qualifying property interest, a qualifying recipient, and a recognized conservation purpose protected in perpetuity.¹

The Property Interest You Donate

Three interests qualify. A fee simple donation gives away your entire ownership of the land. A remainder interest lets you keep the property during your lifetime, with the charity taking full ownership when your use ends. A perpetual conservation easement leaves ownership with you but permanently restricts development. The restriction binds every future owner, forever, and this is the form most donors use.¹

Recognized Conservation Purposes

The donation has to serve at least one of four purposes:

Preserving land for outdoor recreation or education by the public.
Protecting the natural habitat of fish, wildlife, plants, or a similar ecosystem.
Preserving historically important land areas or certified historic structures.
Preserving open space (farmland, forest, or scenic land) for scenic enjoyment or under a governmental conservation policy, where the preservation yields a significant public benefit.

That “significant public benefit” test bites hardest on open-space donations. The IRS weighs whether the public can see or use the land, whether the easement fits a broader conservation plan, and whether development would harm the surrounding area. Easements on parcels the public can’t see and that connect to no government program face real scrutiny.¹

Who Can Receive the Donation

The recipient must be a governmental unit or a Section 501(c)(3) charity that also meets Section 509(a)(2) or 509(a)(3). Most donations go to land trusts, which are nonprofits set up to hold easements and monitor them long-term. The organization must have the commitment and resources to enforce the restrictions in perpetuity.¹

Mortgage Subordination Before You Donate

If there is any mortgage on the property, the lender has to subordinate its interest to the charity’s right to enforce the easement, in writing, before the easement is recorded. Without that subordination, no deduction is allowed. A bank that could wipe out the easement through foreclosure means the conservation purpose isn’t “protected in perpetuity,” and the donation fails the permanence test on its face.²

Approach the lender early. Some cooperate, some resist, some charge fees. Failing to get the signed subordination before recording kills the deduction even when everything else is done right.

How the Deduction Is Valued

Your deduction equals the fair market value of the interest you gave up. Valuation is where most conservation-deduction fights start, and the IRS requires a qualified appraisal by a qualified appraiser following the Uniform Standards of Professional Appraisal Practice. The appraisal cannot be dated earlier than 60 days before the donation, and it must be finished by the due date of your return, including extensions.¹

The appraiser needs verifiable education and experience with the specific type of property, must regularly appraise for compensation, and must not be barred from IRS practice. Someone who mainly appraises houses is not qualified to value a 500-acre agricultural easement.¹

Fee Simple Land

When you donate the whole property, fair market value is what a willing buyer would pay a willing seller with reasonable knowledge of the facts, based on comparable sales. The appraiser values the land at its highest and best use at the time of the gift, not how you happen to use it. Farmland that could legally be subdivided into residential lots may be worth more as potential development land than as a farm, and the deduction follows that higher use.

Conservation Easements: Before and After

Easements are valued using the “before and after” method. The appraiser determines what the whole property is worth without the easement, then what it is worth with the permanent restrictions in place. The difference is your deduction. Comparable sales of similar easements can substitute in theory, but a real market for them rarely exists.²

The “before” value reflects the property’s highest and best use unrestricted. The “after” value reflects what a buyer would pay once the development rights are gone. When the easement doesn’t actually restrict much, the deduction is small or zero.

The Enhancement Reduction

If placing an easement on one parcel increases the value of other property you or a related person owns, the deduction must be reduced by that increase. The regulations tell the appraiser to look at the entire contiguous tract you and your family own. Preserving a wooded buffer, for instance, might make the adjacent homesites you kept more valuable, and that increase comes out of the deduction. The appraisal has to analyze this specifically. Ignoring enhancement is one of the fastest ways to lose the deduction in an audit.²

AGI Limits and the 15-Year Carryover

Qualified conservation contributions get their own, more generous ceiling under Section 170(b)(1)(E), replacing the ordinary 30% cap for donations of appreciated capital gain property.¹

50% of AGI for Most Donors

For most individuals, the deduction for a qualified conservation contribution in any single year cannot exceed 50% of AGI, reduced by other charitable contributions you claimed that year. With $200,000 of AGI and no other giving, you can deduct up to $100,000 of the easement value that year, even if the easement is worth much more.¹

100% of AGI for Qualified Farmers and Ranchers

If more than 50% of your gross income for the year comes from farming, you are a “qualified farmer or rancher” and can deduct up to 100% of AGI, which can effectively eliminate federal income tax for that year. There is a condition: if the donated property is used in agriculture or livestock production, the easement itself must restrict the land to remain available for agricultural use. Without that restriction on the deed, the 100% limit doesn’t apply to that property.¹

Carrying the Excess Forward 15 Years

Whatever you cannot deduct in the contribution year carries forward for up to 15 succeeding tax years, much longer than the standard five-year carryover for other charitable gifts. A $1 million easement donated by someone with $200,000 of AGI has the donation year plus 15 more to absorb the full deduction. In each carryover year the same AGI percentage (50%, or 100% for qualified farmers and ranchers) applies to the remaining balance. Anything still unused after the 15th carryover year is lost, so track the balance on every return.¹

Paperwork You Have To Get Right

Documentation problems are the most common reason the IRS disallows these deductions. The deadlines are strict and there are no do-overs.

Written Acknowledgment From the Charity

Get a written acknowledgment from the recipient describing the donated property, confirming receipt, and stating whether you received anything in return. You must have it by the earlier of the date you file the return or the return’s due date including extensions. If you got nothing in exchange, the letter has to say so explicitly.³

Form 8283, Section B

Any noncash contribution over $5,000 requires Section B of Form 8283 attached to your return. For land and easements, the form summarizes the property, the appraised value, and the appraiser’s qualifications. The qualified appraiser signs it, and an authorized representative of the donee organization signs it too, confirming receipt.⁴

The Full Appraisal for Deductions Over $500,000

When the deduction claimed exceeds $500,000, attach the complete qualified appraisal to your return, not just the Form 8283 summary. This applies in every year you claim the deduction, carryover years included. The IRS gets immediate access to the appraiser’s full methodology and comparables.¹

Baseline Documentation

Before the easement is recorded, the donor and land trust prepare a baseline documentation report describing the property’s condition at the time of the gift, with maps, photographs, and an inventory of conservation values and existing improvements. Treasury regulations require this documentation to establish the property’s condition at the time of donation, and it becomes the reference point for every future monitoring visit or enforcement dispute.²

Audit Risk and Valuation Penalties

Conservation easement deductions are one of the most heavily audited areas of individual tax law. Overvaluation is the flashpoint.

Accuracy-Related Penalties Under Section 6662

If the IRS finds your claimed value was too high, accuracy-related penalties stack on top of the additional tax owed. When the claimed value is 150% or more of the correct value, a 20% penalty applies to the underpayment. At 200% or more, it jumps to a 40% gross valuation misstatement penalty. Courts have applied these aggressively, and “I relied on my appraiser” has not proven a reliable defense.

Syndicated Conservation Easements

The IRS reserves its hardest line for syndicated conservation easements, where a promoter pulls investors into a partnership that buys land, donates an easement, and passes inflated deductions to the partners. In October 2024, Treasury issued final regulations (T.D. 10007) classifying these deals as “listed transactions” when the promised deduction equals or exceeds 2.5 times the investor’s investment.⁵

Listed-transaction status means the partnership, every investor, and every material advisor must disclose the transaction to the IRS. Nondisclosure penalties are severe. A pitch promising 4:1 or 5:1 deductions on your investment is a red flag.⁵

The Statutory 2.5x Basis Cap for Pass-Throughs

Separately, the SECURE 2.0 Act added Section 170(h)(7), which flatly disallows any conservation contribution deduction by a partnership or S corporation if the claimed amount exceeds 2.5 times the sum of each partner’s relevant basis in the entity. This applies to contributions made after December 29, 2022. It is statutory, so no appraisal can override it.⁶

Individual landowners donating easements on property they already own are generally unaffected. The rule targets pass-through entities where investors picked up their interests in connection with the contribution.

State Tax Credits Stack On Top

Roughly 15 states and territories offer their own tax credits for conservation easement donations, and they work independently of the federal deduction, so you can benefit from both. Some states, including Colorado and Virginia, make the credit transferable: if your own tax liability is too small to absorb it, you can sell the unused portion to another taxpayer for cash. Others limit the credit to the donor. Check your state’s current program before assuming anything, because legislatures modify and sometimes suspend these incentives.

1
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
2
eCFR. 26 CFR 1.170A-14 – Qualified Conservation Contributions
3
Internal Revenue Service. Charitable Contributions – Written Acknowledgments
4
Internal Revenue Service. Instructions for Form 8283
5
Federal Register. Syndicated Conservation Easement Transactions as Listed Transactions
6
Federal Register. Statutory Disallowance of Deductions for Certain Qualified Conservation Contributions Made by Partnerships and S Corporations