Preservation Easements Protect Historic Properties for Generations

You've invested your money, sweat and tears in restoring your historic home. How do you protect it in the future once it has passed out of your hands? Preservation easements are one possible answer. Preservation easements are a legal agreement designed to prevent loss of the historic features and setting of recognized cultural property. The easement is a legal document between the property owner and a non-profit organization like Preservation Delaware or a state agency such as the Division of Historical and Cultural Affairs. Generally granted in perpetuity, the easement requires that a third party maintain oversight of the continued preservation of the historic property by reviewing changes to the building and landscape and assuring the property is properly maintained. Through the assignment of this supervisory role to an entity such as Preservation Delaware, preservation and conservation easements are far more powerful than simple deed restrictions.

Easements can be tailored to meet a variety of situations. Easements may be used to protect most types of property including single-family and multi-family residences, commercial structures and buildings with large tracts of land such as farms. Easements that include significant open space as the historic setting for the historic resource are often crafted as conservation and preservation easements and are administered with the help of a land trust.

Since easements impose a certain level of restrictions on property, placement of the easement generates a determined value equal to the difference between the unencumbered property before the easement and once the easement is placed on the property. The resulting value can qualify as a charitable contribution generating a tax deduction. To qualify for a tax deduction the property will usually be listed, or be considered eligible for listing, on the National Register of Historic Places or be located in a certified local historic district.

Granting a preservation easement can have significant tax benefits. The value of the contribution can be used as a deduction against federal income taxes and tends to reduce estate taxes.

The Delaware Land and Historic Resources Tax Credit

Under a new law passed by Delaware's General Assembly easement donations and donations of fee simple property interests are eligible for a state tax credit of 40% of the value of the donation on the first $50,000 of the value of the gift. If the appraised value of the gift exceeds $50,000 the amount over that is treated as a regular tax deduction.

To be eligible, the donation must be of open space, natural habitat, recreational properties, resource conservation, or historic properties. Qualified recipients include state and local governments or a qualified conservation or preservation organization incorporated to accept and administer eligible property or easements. Open space required as part of a subdivision plan approval does not qualify for this tax credit.

Property owners have a licensed real estate appraiser determine the value of the donation and complete State tax form 1801AC to apply for the credit. The credit may not exceed the tax due in any year but may be carried forward for a period of five years.

Preservation Delaware is qualified under the Delaware Land and Historic Resources Tax Credit as a preservation organization. PDI has a preservation easement program that accepts preservation easements for historic properties and their settings. The program documents the historic resource including landscapes, and develops, with the property owner, an easement instrument to assure protection of the resource into the future. In order to provide for the continued preservation of the property, a monitoring fee is applied at the time of the donation. The donor is also responsible for documentation and legal fees. The donor is then able to have a before and after appraisal completed and can then take advantage of the tax benefits derived from the gift.

An easement is an excellent way to reap the reward of protecting the heritage of an important building into the future while receiving substantial tax savings. To find out more about preservation and conservation easements call (302) 651-9617 or 302-832-0300 or e-mail  director@preservationde.org or fsprf@dca.net