Annual Tax Tips for forest landowners addresses changes for 2023 tax year

Ocala State National forest trees
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Advice on Timber Tax Tips for the 2023 tax year is now available from the U.S. Forest Service, USDA and academic partners from the University of Florida’s Institute of Food and Agricultural Sciences (UF/IFAS) and The University of Georgia Warnell School of Forestry and Natural Resources.

An article released by the U.S. Forest Service on Jan. 16 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% 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.

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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.

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. The information in the guide is current as of Dec. 20, 2023, and is available by clicking here: 2023 Tax Tips for Forest Landowners here.

“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,” said co-author Tamara Cushing, the extension assistant professor at UF’s School of Forest, Fisheries, and Geomatics Science (SFFGS). “Forest landowners can use Tax Tips as a tool to assist with completing their own return or take it to their tax accountant.”

Cushing 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 tax tips document 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% of the cost of qualifying depreciable property through bonus depreciation,” said Gregory Frey, research forester for the Southern Research Station and co-author of the Tax Tips. “The limit for bonus depreciation in 2023 is down to 80% and will decrease to zero percent over the next few years.

“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 announced 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.”

Click on this link, Timber Tax Tips | US Forest Service (usda.gov), to read the full timber tax tips article.

For more information, reach out to Cushing at tcushing@ufl.edu.

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