Mortgage Killer Accelerator

Strategy 36 of 107

Landowners: a genuine conservation easement on land you keep

Depends on people or program rulesFrom new cash flow, not your paycheck

What it is

Donate an easement that permanently limits development of your own land to a qualified land trust; you keep owning and using the land.

Steps

  1. Donate an easement that permanently limits development of your own land to a qualified land trust; you keep owning and using the land.
  2. A qualified appraisal sets the deduction. The tax saved each year can go to principal.
  3. Get lender consent; most mortgages require the lender to subordinate to the easement.

Repeat: Once; the deduction can carry forward for several years.

Measure: Tax saved each year (enter as a yearly amount).

Try it in the calculator Enter its amount in "Yearly amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • It is permanent and lowers the land's market value.
  • Syndicated deals that promise deductions several times the investment are an IRS listed transaction; stay away from them.
  • Appraisals are audited closely.

Who it fits

Higher net worth, with assets, Business owners, Grandmas and grandpas (62 and over), Higher earners

Needs

Owns acreage or a large lot

How predictable

Depends on people or program rules (tenants, family, IRS records, lenders)

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (higher net worth, with assets). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: donate an easement that permanently limits development of your own land to a qualified land trust; you keep owning and using the land.

Suppose it brings $6,000 once a year on principal. The loan would be paid off in 17 years 11 months instead of 30 years, saving about $173,949 in interest. To finish in five years, they would still need about $3,488 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Landowner stack: Lease income and the tax saved by a genuine easement go to principal each year; a large timber sale can be a lump sum followed by a recast.

Sources and more information

Where to get help

Related strategies

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