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Chickadee on a Redbud

Division of Forestry
Timber Taxation and Estate Planning

Timber Taxes and Woodland Owners

Selling timber is something that most woodland owners do infrequently; and therefore, they are not familiar with how to claim the income or deductions when filing income tax forms. If you experienced significant timber loss due to storms, drought or other environmental conditions, please visit the National Timber Tax website.

This is an image of a truck hauling logs.

Division of Forestry employees are not experts when it comes to timber tax issues.

Here is a list of situations/activities that may affect the way you file your income tax returns.

Selling Timber
If you have sold timber or plan to sell timber, the way you sell may determine how much taxes are owed. There can be a substantial difference in taxes owed if you have to treat the dollars received as ordinary income versus capital gains.

Cost-Share Payments
Are you receiving cost-share payments? You will need to know how to treat this on your tax return.

Tree Planting
Are you planting trees in abandoned fields or conducting site preparation for your woodlands next timber rotation? Then you may qualify for a reforestation tax credit.

Timber Stand Improvement
Are you conducting timber stand improvement practices in your woodlands or paying someone else to do this? Are you building roads or fixing drainage problems? Then you will want to know about the IRS Timber Tax Form T available for download from the Internal Revenue Service at http://www.irs.gov/pub/irs-pdf/ft.pdf.

Losses
Have you received ice or other storm damage to your woodlands? Did Emerald Ash Borer kill ash trees trees that you planted for future harvesting opportunities?

Trading
Have you and a neighbor traded some woodlands for better management opportunities?

For answers to these and other questions visit the National Timber Tax Web site. The site also includes downloadable copies of the required IRS tax forms and the “Forest Landowners’ Guide to the Federal Income Tax.”

Estate Planning for Forest Landowners

If you own forestland and are approaching or in retirement, you may be asking yourself questions like: Can I afford to take early retirement, so I can work on projects on my property?  How can I transfer the knowledge and experience gained from managing the land to my family? Are the wildlife plots, timber management practices, hiking trails and cabin by the creek that I planned still feasible? If my spouse and I retire to the land are the resources adequate that we can enjoy a satisfactory lifestyle? How will retirement affect our timber investment income? Will sharing that income with our children serve to enrich and motivate them?

Going a step further, if you, your spouse, or both of you were to die today, what would happen to the forestland that you have worked together a lifetime to obtain? Do you have a forest management plan? If yes, will it continue to function as an effective tool for the survivors and provide for them in an equitable manner without disruption? Are your forestry investments structured so that they will retain their value at your death? Have you taken steps to minimize death taxes? Will timber, land or both have to be sold to pay family administrative expenses and estate taxes?

For answers to all these questions, download a copy of the Estate Planning for Forest Landowners: What Will Become of My Timberland? report published by the U.S. Forest Service, Southern Research Station.

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