How do you report income from logging?

Use Form 1040 Schedule F to report farming income and expenses, including minor sales of logs, firewood, or pulpwood if timber is a minor part of your farming operation.

How is timber income taxed?

When you sell timber, your revenue will either be taxed as Ordinary Income or Capital Gains. The tax rate for ordinary income is higher than capital gains tax rates. Your tax advisor can help you determine these payments. The landowner’s best tax advantage usually is through the provisions of capital gains.

How do I report timber royalties?

If you held the timber for more than one year before selling it you should report the total amount received for the timber on Form 1040, Schedule D, Part II, column (d). You may be able to recover your cost basis in the timber sold, also referred to as a depletion allowance.

Is timber considered real estate?

Timberland and unsevered timber, also called standing timber or stumpage, are considered to be real property for 1031 Exchange purposes. The right to cut and remove standing timber under the provisions of a timber deed or cutting contract is classified as a contractual right or other personal property in most states.

What is the capital gains tax on timber?

15 percent
Generally, the maximum long- term capital gains rate for timber is 15 percent (for taxpayers in the 10 or 15 percent ordinary income tax brackets, the maximum long-term capital gains rate is 5 percent).

Is logging considered farming?

While several states have made it quite clear that logging is considered an agricultural activity and offered up many of same exemptions and exceptions that our friends in agricultural currently enjoy at the State level, we are behind the curve in making our case at the national level.

Is timber tax deductible?

For timber held as an investment, timber expenses (along with certain other “miscellaneous itemized deductions”) are no longer deductible, starting in 2018 through 2025 (Public Law 115-97).

What is a timber royalty?

Royalties are defined as payments tied to the extraction of the resource, meaning in the case of timber pay-as-cut contracts. A pay-as-cut contract is one that ties the total amount to be paid to the volume actually cut and the unit price.

What is timber depletion allowance?

The depletion deduction is a tax free return of how much the trees (timber), growing on your land, cost at the date you acquired the property. This purchase price includes the acreage of soil involved plus the trees and any other components of value, such as a house or water frontage that comes with the land.

When land is being sold timber growing on the land is generally considered what?

Ordinarily, growing timber is considered part of the land. In Hutchins v. King, 68 U.S. 53, 59 (1863), the Supreme Court stated that “timber growing upon the land constituted a portion of the realty.

What is a timber tax?

The timber yield tax is a property tax paid by timber owners when they harvest trees, or timber. The tax is paid on a quarterly basis to the California Department of Tax and Fee Administration (CDTFA), which returns it to the counties where the timber was harvested.