Yes, it really is December! With less than a month left to implement certain tax strategies to minimize 2015 income tax liability, there is still time. Tip 1 is the largest opportunity – Conservation Easements. Subsequent updates will inform about the other tips, or just give me a call.
The biggest remaining opportunity to reduce tax liability is to make investments in entities that have the opportunity to donate property rights in order to conserve natural resources. The IRS provides significant tax incentives that help fund these donations. Accredited investors can participate, and the Private Placement Memorandums I’ve seen this year show a ratio of deduction to investment of approximately 4.5:1.
In my seminars for CPAs, I provide a hypothetical example to explain Conservation Easements as a tax strategy for high income clients. The deduction is limited to 30% of Adjusted Gross Income (AGI), minus phaseout, and I use Georgia since at 6% it is midway between states for state income taxes. Assuming a married couple filing jointly with $1,000,000 AGI, same as last year, they have two options:
Option 1 – Write 2 Checks
- IRS for $344,376
2. Georgia Department of Revenue for $59,723
Total $404,099 (40% of AGI)
Option 2 – Write 3 Checks
- Conservation Easement Sponsor for $62,556
2. IRS for $249,330
3. Georgia Department of Revenue for $59,723
Total $354,886 (36% of AGI)
Savings $49,213 (12% of original tax liability)
This hypothetical example is for educational purposes only. Please call or email me if you need a specific illustration.
Expanding Conservation Easements to Conserve Natural Resources
I believe Conservation Easements can be further utilized to preserve natural resources in our country, while bringing this tax strategy to a much broader range of people who are simply not aware of how to utilize them for their own needs, or those of their clients.