The Federal Historic Preservation Tax Incentive Program encourages owners of qualifying historic properties to ensure structures are maintained in an architecturally and historically appropriate manner. The program allows owners to make a donation of a preservation easement in exchange for a one-time, charitable, Federal income tax deduction equal to the appraised value of the preservation easement. The donation is considered a non-cash charitable contribution.
A preservation easement is a legal agreement between a property owner and a qualifying 501© (3) non-profit organization to preserve and protect all open-air sides of a building’s exterior. The owner assigns the right to review and approve any significant exterior changes to the property to the non-profit organization. Changes need to be compatible to the original architectural integrity and design of the property.
Easement holding organizations must be qualified historic preservation organizations in order to accept easements and must have the resources to manage and enforce the easements. A preservation easement is granted in perpetuity and recorded at the county office. It is a permanent attachment to the property deed and passes from owner to owner.
The value of an easement is based on the difference between the appraised fair market value of the property prior to conveying the easement and its value with the easement restrictions in place. There also may be other variables unique to each property that affect the easement valuation. Property owners should consult a professional real estate appraiser to determine the value of an easement.
To be eligible for a preservation easement, a property must be in a certified municipal Historic District, a National Register Historic District or listed as a Landmark Property on the National Register. Properties can be residential (single or multi-family), commercial or industrial.
To obtain the Federal income tax deduction, property owners must file IRS Form 8283 (Non-Cash Charitable Contributions) with their tax return for the year the preservation easement is donated and a deduction first claimed. The form includes the preservation easement appraisal information and must be signed by the real estate appraiser, as well as the qualified, non-profit charitable organization receiving the donation.