Filing and Reporting Your Federal Timber Tax

By Steve Nix, About.com Guide

If you sold standing timber during the taxable year held for over 12 months, you may be able to benefit from the long-term capital gains provisions on timber sale income which will lower your tax obligation.

When you sell standing timber either lump-sum or on a pay-as-cut basis the net proceeds generally qualify as a long-term capital gain. Remember, you can qualify for this long-term capital gains treatment on timber only if you hold the timber over one year. You do not have to pay self-employment tax on capital gains.

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• Some favorable timber tax provisions.
• Establish your basis as soon as possible and keep good records.
• Expenses for managing a forest can be deducted.
• Selling timber during the taxable year qualifies for long-term capital gains.
• Dealing with timber casualty losses.
• You can be taxed on timber cost-share assistance.

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