Landowners need to be familiar with the tax implications and incentives associated with forestland ownership, especially related to reforestation expenses and timber harvest income. The federal government recognizes that growing timber is a long-term, often high-risk investment, and these tax incentives are offered to small private landowners to encourage them to grow timber and reforest their lands after timber harvest.
The U.S. Forest Service Southern Region provides an annual publication called Tax Tips for Forest Landowners. This publication will not answer all questions about forest related taxes, but does help forest landowners understand some basic tax considerations as they manage their forests.
Landowners who are not aware of the reforestation tax credit and amortization provisions are missing out on one of the few long-term incentives available to them for growing trees. The publication contains an example of how these incentives work, and how landowners may claim them when filing federal income tax forms. It also contains a brief overview of capital gains tax treatment of timber income, and how to handle cost-share payments.
An excellent website created solely for the purposes of making landowners aware of forest taxation issues is the National Timber Tax Website. More detailed information and assistance should be obtained from a competent tax adviser familiar with timber tax treatments.
In addition to the publication and website listed above, Oklahoma Forestry Service provides access to the following publications and websites to assist forest landowners.
Forest Landowner's Guide to Federal Income Tax
Federal Income Tax on Timber (A Key to Your Most Frequently Asked Questions)
Timber Casualty Loss Tax Deduction Information
Estate Planning for Forest Landowners
Preserving the Family Woods (Estate Planning)
Income Tax on Cost Share Payment from the Forest Health Protection Program
Internal Revenue Service Website