Iowa income tax credit for charitable contributions of conservation lands
Iowa law allows state taxpayers to claim a substantial Iowa tax credit when they donate one of the following to a qualified conservation organization:
- Land for conservation, scenic value, outdoor education, and/or recreation purposes, or preservation of historically important land or structures
- Conservation easements
- Land value (through “bargain sale” to a conservation entity)
Iowa’s tax credit provides so much value that full or partial donations for conservation purposes can, in some cases, bring landowners nearly as much financial return as a sale. Landowners may be eligible to receive:
- A tax credit of up to 50 percent of the fair market value of the donated real property interest.
- A maximum tax credit of $100,000 per donation.
- Up to a 20-year “carry-over.” Any credit that exceeds your tax liability for the tax year may be credited to next year’s taxes.
Take credit for conservation donations
Iowans can claim an itemized deduction on both state and federal income taxes for a donation of land for conservation.
If you have Iowa income and file an Iowa income tax return, you can choose to claim a state tax credit — and still claim your federal itemized deduction.
The maximum Iowa tax credit is $100,000. A donation valued at $200,000 would enable you to claim the maximum tax credit. If your donation exceeds $200,000 in value, you can then claim an Iowa itemized deduction for the remaining value.
What kind of land donation qualifies?
- Must be land in Iowa.
- Must be “conveyed as an unconditional charitable donation in perpetuity to a qualified organization exclusively for conservation purposes.” These definitions align with the federal IRS rules for donating land or land value for conservation.
What if the land is not owned solely by me as an individual?
Individuals may claim the credit for donating land held in a partnership, a limited liability company, S corporation, or an estate or trust that elects to have the income taxed directly to the individual. The amount you can claim is based on your pro-rata share of your earnings of the partnership, limited liability company, S corporation, estate or trust.
Tax Credit vs. Itemized Deduction
Iowa donors are finding the Iowa tax credit much more beneficial than the itemized deduction. Why?
- Tax credits are subtracted directly from the tax you owe — dollar for dollar.
- In contrast, an itemized deduction reduces the amount of income on which your tax is calculated. Its value depends upon your income tax bracket.
Examples of Tax Credit Savings
Donated land value under $200,000
Assume you donate land valued at $150,000 to a qualified entity, such as Iowa Natural Heritage Foundation:
- Iowa Income Tax Credit: You can claim an Iowa tax credit of $75,000 (half of $150,000).
- Federal Income Tax Deduction: You can still claim an itemized deduction of $150,000 as a charitable contribution on your federal income tax.
- Carry forward: If you cannot use the entire tax benefit this year, you can carry the value of the Iowa tax credit forward up to 20 years (the year of the gift plus 19 more years). You can carry the federal deduction forward up to six years (the year of the gift plus five more years).
Donated land value exceeds $200,000
Assume you donate land valued at $500,000 to a qualified entity:
- Iowa Income Tax Credit: You can count $200,000 of your donation toward your Iowa income tax credit — so you claim the maximum $100,000 tax credit (50 percent of $200,000). You cannot claim 50 percent of your donated value ($250,000) as an Iowa tax credit — because the maximum tax credit is $100,000.
- Iowa Income Tax Deduction: You could then calculate the remaining value of your donation ($500,000 minus $200,000) and claim a $300,000 itemized deduction in addition to your tax credit.
- Federal Income Tax Deduction: You can also claim the full $500,000 as an itemized deduction on your federal tax return.
- Carry forward: If you cannot use the entire tax benefit this year, you can carry the value of the Iowa tax credit forward up to 20 years (the year of the gift plus 19 more years). You can carry the federal deduction forward up to 6 years (the year of the gift plus five more years). If you donated a conservation easement, please note the federal deduction.
The bottom line
Remember, it is not just how much you receive in a transaction that matters. What ultimately counts is how much you get to keep after taxes.
Few conservation donors are motivated solely by tax savings. Every situation is unique, but most landowners explore conservation options because they want to permanently protect land they know and cherish. Or they desire to leave as a legacy a special place where others can enjoy the outdoors far into the future. Tax savings simply make such choices easier.
How to claim the Iowa tax credit
Please consult your tax preparer for professional advice. In short, you’ll use Form IA 148 "Tax Credits Schedule" and attach copy of Federal Form 8283 “Noncash Charitable Contributions" which shows how you calculated the value of your donation. (You'll attach this same form to your federal tax return to claim your federal itemized deduction.) You'll need a qualified appraisal to claim a tax credit or deduction on a donation valued at more than $5,000. If you claim more than one kind of tax credit, you need to deduct the tax credits in a particular sequence.
Learn more about appraisals and claiming your tax benefits.
Details for tax preparers
The Iowa tax credit for donations of conservation land is referenced in the Iowa Administrative Code, Rule 701-42.40 (Iowa Code Section 422.11W) for individuals and 701-52.37 (422.33) for corporations. Qualified conservation contributions are defined in US Code 170(h).
Rules for Iowa Conservation Contribution Tax Credit