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As the owner of a forested area, you know proper forest management sometimes requires the harvest of timber to maintain a healthy environment. When large quantities of trees need to be removed, a commercial timber harvest could be a great way to earn some extra money from this task. If you plan on selling your timber commercially, you should probably consult with a tax professional to ensure you remain compliant with the complexities of tax law. However, this basic overview can give you a better idea of your forest management tax responsibilities.

forest managementCommercially sold timber is sometimes subject to income tax. However, property owners can often have it taxed as a capital gain rather than traditional income. This is because timber can be considered a “capital asset”— part of the property that increases the real estate value. Long-term capital gains have a maximum tax rate of only 20%, nearly half of the maximum rate for income taxes—39.6%. This means, by taxing timber as a long-term capital gain, you won’t have to pay as much in federal taxes.

To keep track of timber-related taxes, you will need to file Federal Tax Form T, which requires information related to acquisitions of forest property, profits and losses, reforestation, and other construction activities. You can also potentially qualify for deductions based on operating expenses related to your forest management. Proper completion of this form can help you navigate tax season without any undue stress.

 

Whether you need accurate timberland appraisals or help understanding taxation, you can trust the forest technicians at Neeley Forestry Services in Camden, AR. With over 140 years of combined experience, their forest management experts will help you get the most out of your property. Visit them online or call (870) 836-5981 to learn more about their services.

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