New guide offers income tax insights for forest landowners

ATHENS — “Tax Tips for Forest Landowners” is a short publication that offers several insights to frequently asked questions as landowners prepare their 2021 taxes. Co-authored by Yanshu Li, assistant professor at the UGA Warnell School of Forestry and Natural Resources; Tamara Cushing, extension assistant professor at the University of Florida; and Gregory Frey, research forester at the USDA forest Service Southern Research Station, the publication is available for download from the USDA Forest Service’s website.

Li said she and her colleagues decided to assemble the guide after receiving several requests from the public. A similar publication produced by the USDA Forest Service was discontinued in 2020, when the USDA’s tax specialist left the position.

“That publication was very popular among foresters, landowners, loggers and tax professionals because it was the most important source of information on timber income tax,” Li said. “So there was one year when there wasn’t a publication, and we received a lot of requests from interested readers.”

Taxes are one of the top concerns for forest landowners, said Li, so the focus of the guide was to clarify tax rules that landowners often overlook. Four years after the 2017 tax overhaul, landowners and tax advisors are still confused about how to classify certain expenses, property taxes and casualty losses.

For example, if a landowner profits from a timber sale, that income can be reported as a capital gain rather than other income. This allows the proceeds to be taxed at zero to 15% as opposed to a rate of 10% to 37%.

“For most timber owners, the income qualifies as capital gains — but a lot of them don’t know about this,” Li said. “A lot of landowners are not aware of these provisions; we have been doing outreach for many years with different collaborators, and it’s still a mission for us to reach them and let them know the information is available to them, to help them save tax dollars.”

She also noted that if a landowner realized income on land that wasn’t logged, they could still qualify for some deductions. Landowners might find deductions for reforestation practices, expenses associated with managing habitat or even income from an eco-tourism business.

“A lot of people generate additional income from hunting leases, and they can also deduct expenses — it doesn’t have to be just growing timber,” she said. “The most important thing is to manage your land like a business. Have a separate bank account, a forest management plan and hire professionals to help manage your land. There’s opportunity there.”

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