Advice on Timber Tax Tips for the 2023 tax year is now available from the U.S. Forest Service and academic partners from the University of Florida’s Institute of Food and Agricultural Sciences and The University of Georgia Warnell School of Forestry and Natural Resources.
An article released by the U.S. Forest Service on Jan. 16, 2024, states that about 443 million acres of forest in the U.S. are privately owned and about 288 million acres of those acres are owned by private, non-corporate entities such as families. And according to the article, “That means more than 10 million private owners control 50 percent of all forestlands in the U.S.”
The question posed to forest landowners is: Since all those lands have taxable value, are you ready for April 15? Private forest landowners may start to think about timber-related Federal income taxes only after having a timber sale. However, each forest activity conducted can have tax implications.
"Generally, all income received is taxable unless excluded by tax law, and nothing is deductible unless a provision allows it. Understanding the forest-related provisions and integrating tax planning into forest management can help forest landowners lower their taxes," according to the Tax Tips publication.
The annual tax tips publication is "intended to be an informational and educational resource for forest owners and tax advisors, but is not intended as financial, tax, or legal advice. It is important to consult with your tax advisor concerning your tax situation."
According to co-author Tamara Cushing, “There are sections of the Internal Revenue Code that have quite a bit of gray area or depend on knowledge of other sections of the code. Forest landowners can use Tax Tips as a tool to assist with completing their own return or take it to their tax accountant.”
More than 10 million private owners control 50 percent of all forestlands in the U.S.
Cushing is the extension assistant professor at the University of Florida’s School of Forest, Fisheries, and Geomatics Science. She uses her background in forestry and business to teach cash flow analysis, forest economics and management, and to help private landowners and their advisors to provide information needed to make decisions related to forest management.
The article addresses changes in deduction percentages of qualifying depreciable property through bonus depreciation. “One change for the 2023 tax year affecting some forest owners is that investors and business owners are no longer allowed to immediately deduct 100 percent of the cost of qualifying depreciable property through bonus depreciation. The limit for bonus depreciation in 2023 is down to 80 percent and will decrease to zero percent over the next few years,” reported Gregory Frey, research forester for the Southern Research Station and co-author of the Tax Tips. “Forest owners can still deduct those types of expenses through traditional depreciation over multiple years. The new Tax Tips explains that and also contains new information on topics of interest such as flow-through entities and income from forest carbon.”
The article also announces that, “The Forest Service is currently working to revise the 164-page 2013 Forest Landowners’ Guide to the Federal Income Tax with a goal of publishing the new guide this year.”
“Tax law is challenging, and forest owners may only have one timber sale in their lifetime,” according to Cushing. Co-author Yanshu Li, UGA’s associate professor of forest economics and taxation outreach specialist adds, “The best practice is to integrate timber tax planning into forest management plans and always think about the tax implications before conducting forest activities.”
Click here to read the full timber tax tips article: Timber Tax Tips | US Forest Service (usda.gov)
Click here to access Tax Tips for Forest Landowners: 2023 Tax Year (usda.gov)
For more information, please reach out to Tamara Cushing, extension assistant professor at the University of Florida’s School of Forest, Fisheries, and Geomatics Sciences. tcushing@ufl.edu