Comparing the Tax Benefits of Land Conservation Options (Fee Simple Land Donations, Conservation Easements, and Historical Easements)

Preserving land or properties for ecological, historical, or cultural reasons can yield social benefits as well as significant tax savings. Several such strategies offer notable returns. These include fee simple land donations, conservation easements, and historical easements. Each option presents unique characteristics, benefits, and risks. A thorough understanding of these differences can assist in making informed tax decisions.

Conservation Easements: Partial Ownership with Restrictions

What is a conservation easement?

A conservation easement is a legal agreement between a landowner and a qualified organization, such as a land trust or a government agency, that restricts the development of the land in perpetuity, protecting for conservation purposes — say, protecting wildlife habitats or preserving historic sites — even if the property is sold or passed down to future generations. Conservation easements, in short, are a way for landowners to protect their property from future development, no matter who ends up in control of the property. In return, landowners receive a charitable deduction for limiting development potential.

How are easements valued?

There isn’t usually a large, liquid market for perpetual land easements (or the value you are losing for restricting development) and, as a consequence, there aren’t many comparable sales to serve as the basis for a valuation. Instead, the valuation of any such easement is generally made using a “before and after” approach.

When appraising a property for the purposes of donating or selling a conservation easement, the appraiser will typically assess the property’s value in two scenarios:

  1. Before the Easement (Unencumbered Value): This estimates the property’s value considering its “highest and best use” without any development restrictions. This is essentially the property’s full development potential value.
  2. After the Easement (Encumbered Value): This estimates the property’s value with the conservation easement restrictions in place, which could limit or eliminate certain development possibilities.

The difference between these two values represents the value of the conservation easement itself and the charitable deduction you will receive. This difference can be significant, especially in areas facing pressure to develop.

Benefits of easements

  1. Retain Ownership: You retain ownership of the land, which means you can live on it, sell it, or pass it on to heirs.
  2. Tax Incentives: The charitable deduction, which is based on the value lost due to the promised development restrictions, is typically 4 to 6 times the value of your investment.
  3. Customization: Easements can be customized to suit the specific features of the land and the owner’s preferences.


  1. Permanent Restrictions: These restrictions usually run with the land, meaning future owners will also be bound by them.
  2. Ongoing Responsibilities: You may still be responsible for the land’s upkeep, depending on the terms of the agreement.
  3. Recent Regulatory Changes: Laws passed in 2022 may limit or disallow charitable deductions for conservation easements valued at 250% or more of the initial investment, if not held for an extended period.

Given the recent changes, there has not been enough time to see how enforcement will play out. But much of this industry has started to move away from conservation easements to other less-fraught structures, including fee simple land donations and historical easements.

Fee Simple Land Donations: Total Transfer with Tax Benefits

What is a fee simple land donation?

Fee simple land donation combines a conservation easement on the property with donation of the property ownership itself to a conservation-focused nonprofit or government entity. That is, the owner restricts future development on the land and gives it away to an organization committed to the land’s protection.

Benefits of the fee simple approach

  1. Tax Benefits: Significant tax deductions may be available for the fair market value of the donated land. These deductions are typically 4 to 6 times the investment value (due to the “highest and best use” principle, about which you can read more here).
  2. Simplicity: The process is straightforward, generally involving fewer legal complexities and ongoing maintenance than conservation or historical easements.
  3. Permanent Conservation: Once the land is transferred, the receiving entity becomes responsible for its conservation in perpetuity.


  1. Loss of Control: The donor relinquishes all control over the land.
  2. Legal Risk: The IRS has been legally empowered to target conservation easements and disallow or reduce their deductions. Although the new law doesn’t say so specifically, some observers believe that this power could extend to fee simple land donations.
  3. Smaller Deduction: While conservation and historical easements can eliminate up to 50% of your Adjusted Gross Income (AGI), fee simple land donation deductions are capped at 30% of your AGI.

Historical Easements: Preserving the Past

What is a historical easement?

Historical easements are similar to conservation easements but center on preserving structures or lands of historical significance. Because historical easements are intended to preserve the heritage of structures and areas, they allow for some development, but only under strict guidelines. Critically, while historical easements carry tax benefits similar to those that apply to conservations easements, they are governed under a different statutory regime. As a result, commentators believe that historical easements are the least likely of the three strategies discussed here to be impacted by the IRS’s new legal powers and, accordingly, historical easements are currently considered to carry the lowest risk of the three.

Benefits of historical easements

  1. Tax Benefits: Significant tax deductions may be available for the fair market value of the donated structure, including the “highest and best use,” which can include additional stories or even additional structures. These deductions are typically 4 to 6 times the investment value.
  2. Preservation: Ensures that historical value of the property is maintained for future generations.
  3. Development Potential: The owner may the land around the historical structure, which can mean more commercial opportunities.


  1. Strict Guidelines: You must adhere to specific restoration and maintenance criteria.
  2. Limited Alterations: Most changes to the property after the easement is granted will require approval, which can be a lengthy process.

Conclusion: Which is right for you?

  • For Simplicity: Fee simple land donations are the most straightforward.
  • For Ownership with Conservation: Conservation easements offer a balance between preservation and ownership.
  • For the Lowest Risk: Historical easements are ideal for people looking for charitable conservation deductions with the lowest risk.

Understanding your goals for the property, your financial situation, and your desire for involvement in the land’s future can help you determine the most suitable option.