A historic preservation easement can be a powerful tool for a commercial property owner, but it is not automatically a good deal. The decision hinges on one central trade-off: you exchange permanent, binding restrictions on your property for a potential federal income tax deduction whose size depends heavily on how much the easement actually restricts beyond what local law already does. If your building sits in a strong local historic district with binding design review, the easement may be worth little or nothing. If local regulation is thin, the same easement may generate meaningful protection and tax benefits.
What is a Historic Preservation Easement?
A historic preservation easement is a voluntary legal agreement, typically recorded as a deed, that protects a historic property by restricting development or changes to it. Under its terms, the property owner grants a portion of, or an interest in, the property to an organization whose mission includes historic preservation, as the District of Columbia's government describes its own easement program. The easement permanently restricts the owner from altering, demolishing, or modifying the historic character of a significant building, and it survives changes in ownership, binding every future buyer.
The National Park Service, which administers federal easement guidance, notes that if certain criteria are met, the owner may be eligible for a federal income tax deduction for the value of the easement, and federal estate taxes may also be reduced. Many state tax codes provide additional benefits, though this article focuses on the federal level. Because the rules are complex, the Park Service advises owners to consult an accountant or tax attorney before donating an easement.
