Land Investment Options
Ways to Purchase Land and Reduce Tax Liability
Conservation Easements
Description: Donate development rights to a land trust or government agency.
Tax Benefit: Potential for significant charitable deduction on federal income taxes.
Key Points:
Must be a qualified conservation contribution
Deduction based on the fair market value of the donated easement
Can reduce estate taxes by lowering the property’s taxable value
1031 Exchange (Like-Kind Exchange)
Description: Swap one investment property for another.
Tax Benefit: Defer capital gains taxes on the sale of the property.
Key Points:
Both properties must be for investment or business use
Strict timelines for identifying and closing on the new property
Can potentially defer taxes indefinitely through successive exchanges
Opportunity Zones
Description: Invest in designated economically distressed communities.
Tax Benefit: Defer and potentially reduce capital gains taxes.
Key Points:
Invest capital gains into a Qualified Opportunity Fund
Defer tax on the invested gain until 2026 or when the investment is sold
Exclude up to 15% of the original gain from taxation if held for 7 years
Pay no capital gains tax on appreciation if held for 10+ years
Wind Energy Investments
Production Tax Credits (PTCs)
Description: Invest in wind energy projects eligible for federal tax credits.
Tax Benefit: Credit based on the amount of electricity produced and sold.
Key Points:
Credit available for the first 10 years of the project’s operation
Can be used to offset tax liability dollar-for-dollar
Subject to phase-out schedule; check current rates
Investment Tax Credit (ITC)
Description: Claim a credit for a percentage of the investment in wind energy equipment.
Tax Benefit: Credit of up to 30% of the investment cost.
Key Points:
Alternative to PTC
Credit taken in the year the facility is placed in service
Reduction in basis of the property for depreciation purposes