As the saying goes, some things in life are unavoidable – like taxes.
If you sold timber recently, you’ll have to address the income taxes related to the sale event, when it comes time to file your tax return.
The US Department of Agriculture Forest Service has a Forest Landowners’ Guide to the Federal Income Tax, also known as Agriculture Handbook 718. This is an excellent resource.
Generally, the sale of standing timber (if you owned your property for more than one year) can be qualify for long-term capital gain treatment, rather than being taxed as ordinary income.
From this income you are allowed to deduct the expenses associated with the timber sale and also the cost (basis) of the timber sold. Often this “basis” calculation requires help from your accountant or tax professional. There are a number of ways that basis is calculated, and we would be glad to discuss this with your professional tax advisor.
Also, if you ever need an updated timber inventory or timber appraisal, please contact us. We can help.