Can Owning Wetlands Decrease a Homeowner's Property Taxes?

by Griffith Pritchard

Wetlands are a precious natural resource that federal and state governments try to safeguard by offering tax benefits to homeowners who protect wetlands on their property. Wetlands filter and clean water, protect communities from flooding and provide a habitat for many plants and animals. The amount of wetlands in the United States has decreased by 50 percent since the 1600s, and 74 percent of the remaining wetlands are located on private property.

Federal Deductions

Tax breaks are available to encourage homeowners, farmers and ranchers to set aside wetlands on their property and donate them to qualified conservancy organizations. The Internal Revenue Service allows property owners to deduct the professionally appraised fair market value of wetlands from the adjusted gross income of the donor. The deduction is limited to 50 percent of AGI for regular homeowners and 100 percent of AGI for farmers and ranchers. The deductions can carry over for five years for homeowners and 15 years for farmers and ranchers to allow them to fully depreciate from their taxes the value of the property being donated.

Qualified Organizations

Wetlands donations can be made to federal, state or local governmental agencies and public charities that manage public lands or to a 501(c)(3) nonprofit organization, such as EarthCredits, to qualify for a tax deduction. The agency or organization taking control of the property must have the capacity to maintain and protect the wetlands by using paid workers and volunteers to enforce any restrictions on the use of the property.

Conservation Easements

A homeowner might also gain a tax deduction by establishing a conservation easement agreement with a qualified conservancy organization. The homeowner can still live on the property, but the right to develop or change the wetlands is transferred to the qualified conservancy organizations that monitor and maintain the wetlands. The legally binding agreement lasts in perpetuity regardless of whether the property is sold or passed onto future generations.

State Deductions

States have also provided incentives to property owners to maintain wetlands in their natural condition rather than drain them for other uses or place them into a preservation trust. For instance, Minnesota allows property owners to deduct the value of the wetlands from their overall property assessment as long as the local county assessor has identified the parcels that will be exempt from taxes or determined how much of the land is in a preservation area. The amount of the deduction is equal to the fair market value of any use that is consistent with keeping the land in its natural state.

About the Author

Griffith Pritchard served as a senior branch manager and banking officer for M&T Bank. He specialized in small business and personal financial, credit and banking products. He also has extensive experience in small business sales and non-profit management. Pritchard is a graduate of Hobart College.

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