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Helping Forestland Owners Navigate the Tax Code

Posted by Joyce El Kouarti, Office of Communication, USDA Forest Service in Forestry
Aug 02, 2021
Piles of beech wood on a winding forest path
Growing and maintaining forests is a long-term investment. A landowner who plants seedlings in 2018 won’t see a return on that investment until decades later, assuming no trees are lost to forest fires, insect infestation, hurricane, or other natural disaster. (Getty Images)

Since Congress overhauled the federal tax code in December 2017, forest landowners and timber business owners have scrambled to figure out how the new changes will affect them in 2018.

Fortunately, USDA Forest Service Forest Taxation and Estate Planning Program is here to help private forest landowners, foresters, loggers, and timber businesses navigate the new rules.

Growing and maintaining timber is a long-term investment. Because trees can take many years to mature, forests are managed over several decades. A landowner who plants seedlings in 2018 may not see a return on that investment until decades later, assuming no trees are lost to forest fire, insect infestation, hurricane, or other natural disaster.

While waiting for the trees to mature, timberland owners take steps to ensure the health of the trees in their care: they manage weeds and invasive insects, thin the forests to grow quality timber, maintain firebreaks to reduce the risk of wildfire, and may maintain roads. This work requires money. Fortunately, federal tax provisions help keep stewardship efforts affordable by allowing the deduction of tree planting and forest management.

The Forest Taxation and Estate Planning Program, under the agency’s State and Private Forestry, Cooperative Forestry Program, delivers national leadership on forest tax policy critical to private forest stewardship and serves as a trusted source of information on the complex tax issues associated with forest management.

Program staff track the latest tax law changes and share information on forest tax policy and estate planning through publications like the Federal Income Tax on Timber: A Quick Guide for Woodland Owners and Forest Landowners’ Guide to the Federal Income Tax (PDF, 17 MB), as well as through presentations, workshops, and webinars. This tax guidance helps private forest landowners and rural communities to manage their lands sustainably.

Last year Congress passed new tax law changes to provide relief to taxpayers impacted by Hurricanes Harvey, Irma, and Maria. Timber Tax Specialist Linda Wang summarized these changes in Income Tax Deduction on Timber and Landscape Tree Loss from Casualty (PDF, 154 KB).

Wang travels the country delivering workshops to private landowners, foresters, timber business owners, accountants, and tax preparers, as well as online webinars on updated tax laws affecting timberland owners. Each year, she also updates Tax Tips for Forest Landowners (PDF, 68 KB), a resource eagerly awaited by not only forest landowners, but also forestry consultants, accountants, lawyers, and state agency land managers as well.

“As a field forester, I am not well versed in taxation,” said Service Forester Mark E. Rickey from Ohio. “I hand these resources out with each stewardship plan I prepare for private landowners in my service area. This information helps me educate landowners and the professionals they employ on how to achieve good, sustainable forestry.”

Timber Tax Specialist Linda Wang in a workshop
Timber Tax Specialist Linda Wang travels the country delivering workshops to private landowners, foresters, timber business owners, and others. (Photo by Karol Osborne, Louisiana State University)
Category/Topic: Forestry

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Mark Beard
Nov 11, 2019

I’m trying to figure out how to navigate the tax and estate aspects of starting about 30 acres of reforestation/afforestation.

Can you send me contact information of someone knowledgeable who can guide me through the process?

I’m in Platte County Missouri

Cindy Davis
Dec 11, 2019

The information I have read on the tax changes states investors can depreciate equipment, but my accountant says there is no place on the tax forms to place it. Can investors still take depreciation, or not? If so, where in the tax returns do we list it?

Ben Weaver
Dec 30, 2019

@Cindy Davis - thank you for your comment. The tax law has changed on taking forest management expense deduction for investor effective for the tax years of 2018-2026. Investors can no longer take deductions including depreciation in the year the expenses were incurred. Thus, there’s no place for it. The source for the law change is the Tax Cut and Jobs Act (PDF, 456 KB).

The expenses, including the depreciations, may be capitalized (adding them to the timber cost/basis) and recover/deduct them upon timber cutting/sales. This is less than ideal, however, the expenses are not lost entirely. You will need to make an election to capitalize by filing a statement with your return stating your election to capitalize such expenses.

john mason
Mar 16, 2020

Does your group offer help for Timber Casualty Loss and salvaged logging, Mendocino Complex Fire 2018 property owners. Briefly, we lost 30 acres of fir/pine of timber, we had it salvaged logged in 2019. Our Forrester gave us an appraisal letter with calculations showing total timber value loss at the time of the fire at $167K. The salvage logging yielded us only about $24k. We inherited the property in 1965. Our Tax account has ignored the $167K figure, and has deducted only $500 from the $24k, using the $500 figure as the adjusted basis for the timber. Could this be correct (hard to believe)? One last question, we paid $2k in California Yield Tax, is this deductible? I would SO MUCH APPRECIATE A RESPONSE-PLEASE.! If my tax guy is wrong, can you relay any computer links to me that I can look over. Hope to hear from you, again thanks. John Mason, San Mateo, Ca

Mary G
Apr 14, 2020

In the USDA Tax Tips for Forest Landowners for the 2018 Tax Year, in the section "Reforestation Costs", the statement was made that "Reforestation costs are tax deductible. Taxpayers may deduct up to $10,000 per year per qualified timber property....Report the deduction as an adjustment to gross income on the front of Form 1040 for investment....Also, attach a statement to the return showing the date, location, and amount of the expenditure". Is this still accurate? Your statements in the comments seem to indicate you may only capitalize expenses. We have harvested all of our timber and are now reforesting with some limited cost-share income.

Ben Weaver
Apr 15, 2020

@Mary G - thank you for your comment. The deduction for reforestation in our Tax Tips for the 2018 Tax Year is accurate. To clarify your question on capitalization, if you follow the rules described in our Tax Tips publication, you don’t need to capitalize the reforestation expenses ( per Sec. 194 of the Tax Code) provided you made the timely election for deduction (i.e. amortization) for that year.

Linda Weber
Jun 02, 2021

Dr. Wang's tax tips were so helpful to landowners in our hazardous fuels reduction program in Mineral, Missoula, and Ravalli counties in Montana. Will she be able to update the information? Thank you

Jessie Shields- Landowner Sycan Ranch
Sep 02, 2021

My ranch lost forest trees on my 700acre ranch during the Bootleg Fire ,Beatty Oregon. I gave permission and encouragement to the USFS to remove any trees needed to prepare a firebreak plan as they worked towards the start of containment on this massive fire. The fire destroyed additional trees in the process. We also told them to use water from any of our spring filled ponds which they did with helicopters. Their efforts were successful and they moved on to other lands and managed more containment. We are now attempting to deal with erosion control methods before winter to protect the waterway along the Sycan River. As we work on this challenge ,I have instructed my family to monitor all expenses. I am attempting to get professional instructions from the NRCS , USFS and anyone else with the knowledge to help us. Your direction? Thank you, Jessie Shields

Randall Curtis
Mar 25, 2022

I am a member of a family farm LLC (timberland). Can expenses be carried over for multiple years until next timber sale is realized and utilized as a deduction at that time? Thanks