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Updated: September 16, 2017
Did you know you can deduct original purchase costs and timber sale-related expenses from timber sale proceeds? Did you know that reporting your timber as a capital gain can reduce you tax rate by as much as 20%? Did you know you may be eligible for deducting up to $10,000 per year of expenses related to stand establishment (i.e. regeneration)? In Pennsylvania, regeneration includes costs of fencing, herbicides, and of course tree planting. These, among others, are tax incentives offered by the IRS specifically for timber growers in the US. Over the last 20-30 years the Congress passed laws to encourage timber production and tree establishment. More information about these and other tax incentives is found at the end of this article. Before moving forward consider these four important points to get you on your way:
Tax laws and the IRS Code are not only confusing but change constantly. Keeping up to date requires diligence that includes working with you tax team and understanding the issues. Short courses for forest landowners on tax issues are available from Penn State Extension. Also, suggested readings range from a very simple two- pager annually distributed by the USDA Forest Service called Tax Tips, to a Penn State publication, Timber Taxation I call a primer, to the detailed USDA Forest Service Handbook on Federal Incomes Taxes for Forest Landowners. These publications and more can be found at an excellent website.
Prepared by Michael Jacobson, associate professor of Forest Resources
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