Tuesday, July 24, 2012

Want to save money on your property tax bill?

Then you need to learn more abour 'Conservation Use Covenant' !
Let's start with a definition - Owners of agricultural land, timberland and environmentally sensitive land may qualify for conservation use assessment under Georgia law. Please remember...this is different than a Conservation Easement. I will discuss that in a later article. The Georgia Revenue Commissioner has the responsibility of annually determining the values for ad valorem tax purposes of this type land and publishing rules and regulations to help county tax assessors determine the values of property that qualify for conservation use assessment. 
Conservation use property is assessed at 40% of current use value which gives a reduced assessment to the owner of this type property when compared to other property assessed at 40% of fair market value. This favorable tax treatment is designed to protect these property owners from being pressured by the property tax burden to convert their land from agricultural use to residential or commercial use, hence the name "conservation use" assessment. In return for the favorable tax treatment, the property owner must keep the land undeveloped in a qualifying use for a period of ten years or incur stiff penalties. In some states, it is referred to as 'Current Use'.

      Benefits to Landowner       Landowners receive an ad valorem tax rate deduction for their property i.e. my property tax bill was reduced from $800 to $255 per year in Johnson County, GA
      Costs to Landowner - There are no direct costs to the landowner for entering into a CUVA covenant for forested lands or agricultural lands.   There are significant penalties for landowners who break the covenant before the end of the 10-year period. Owners who break their conservation use covenant must pay back to the taxing authorities twice the savings they received over the life of the covenant up to the point it was breached, plus any applicable interest.  If the property is sold during the covenant period, the new landowner must agree to continue the covenant or the tax penalty will be levied against the property as a lien.
Term - Landowners must promise to maintain their lands in the designated use (agriculture, forestry, or environmentally sensitive) for 10 years. Landowners can re-enroll after 10 years if they wish to remain in CUVA. Landowner must enroll between Jan 1 and April 1
Eligibility - Each county tax assessor’s office administers the program independently, so application requirements may vary among counties. Generally, a minimum of 10 acres is required for enrollment, but some counties have recently increased the minimum acreage to 25 acres. No more than 2,000 acres can be enrolled in CUVA by any one non-industrial, private landowner. Foreign citizens and foreign corporations are not eligible to enroll. The land must be kept in its qualifying use and cannot be used for any non-agricultural commercial business. To qualify, you must be a natural  citizen.
Landowner Initiation Contact your local county tax assessor’s office for applications and enrollment information. Applications for conservation use assessment must be filed with the county board of tax assessors on or before the last day for filing ad valorem tax returns in the county (usually April 1st). For more specifics on CUVA, refer to the Georgia Department of Revenue’s web page at   

For Information on Buying or Selling Land contact G. Kent Morris, ALC, RF at          (706) 457-0090

Monday, July 2, 2012

Are You Doing Any Estate Planning With All That Land?

This is an important topic especially for a large landowner. Your estate may be subject to estate taxes (commonly called death taxes) when you decease. I am not qualified to make recommendations but do want to bring this important topic to mind. You should seek the advice of a Certified Financial Planner  or Certified Insurance Counselor.
If you are planning to die you missed the best year, 2010 :-) !  There were no estate taxes due that year. In 2011, your estate was taxed for that amount over $5,000,000 at a federal tax rate of 35%. The amount will go up each year. Currently the amount for 2012 is $5,120,000.

There are several tools at your disposal to help with estate planning. I will only cover 2:
Gifting – Currently you can give away assets worth $13,000. That includes both a husband and wife. Each recipient (or child) will receive $26,000. If there are several children, you can reduce the estate by a sizable amount
Insurance – This sounds simplistic, but it is a great tool. You simply buy an insurance policy that is worth the estate tax bill at time of death.
            I have included a link that has a publication about Estate Planning. It is a little dated in terms of estate exclusions and tax rates but the advice is sound.

            Let’s talk basis. This becomes important when the property is sold. If you acquire the property by gifting,  your basis remains the same as the one who gifted you the property. Usually it is low because they have owned the property for a long time. Therefore a hefty capital gains tax may be due when the property is sold. If the property is inherited, you receive a stepped-up basis. Your basis is the FMV (Fair Market Value) at the time of inheritance. It is important that you have an appraisal done soon after the inheritance. I just completed a timber appraisal on a 350 acre farm in Meriwether County, GA. to help the owners with some planning! Estate Planning is important and it won't go away if you stick your head in the sand. Get good advice and start now!

For Information on Buying or Selling Land contact G. Kent Morris, ALC, RF at      (706) 457-0090