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It’s probably not your normal habit to think about taxes during the holiday season, but if you’re a family forestland owner it could be the best gift you could give yourself.
Managing family forestlands demand time, energy and expense. The rewards usually come not from big paychecks at the mill, but from the satisfaction of healthy forests, a sense of stewardship and a place the whole family can enjoy. This said, there are some steps you can take to reduce the taxes you pay on your forest management activities.
Minimizing Oregon forestland property taxes is all about the “right” assessment. An assessment is the value applied to real property for taxation purposes. In most cases it is based on the property’s highest-and-best-use value, but woodland owners may request a “designated forestland special assessment” that lowers the assessed value as a means of encouraging them to keep the land in forests. The difference between the specially assessed and highest-and-best-use assessed values can be dramatic. So if you’re maintaining all or part of your property in forests, check into the designated forestland special assessment.
Property assessed as forestland is normally taxed though the Forestland Program. Taxes under this program range from 40 cents to $6.75 per acre, depending on the land’s productivity. It’s a pure land tax (not a timber tax).
It’s the program of choice for persons or companies making regular timber harvests.
Family forestland owners who harvest infrequently may prefer the Small Tract Forestland Option. It features an annual tax just one-fifth the normal amount, but makes up the difference (approximately) through a Severance Tax (currently $4.11 per thousand board feet) on timber harvested from the property.
When it comes to income taxes, I’ve got two words for family forestland owners: business and basis.
If you’re actively involved in your forest’s management, keep good records, and if you can demonstrate a profit motive (even if that profit is unlikely to occur for many years), you can almost certainly meet IRS requirements for treatment as a business. This gives you the greatest ability to claim forest management expenses or losses on your tax return.
Basis refers to the original cost of your forestland investment. When you conduct a timber sale you can reduce the taxable net gain by the amount you paid for the timber – if you know how much of your basis applies to your timber.
Basis is best determined at the time of purchase or inheritance, but it can be determined retroactively if necessary. Knowing your property’s basis could save you thousands of dollars in income taxes – so check with your accountant to see if it has been determined for your property.
Extension has two excellent publications on forestland taxes available for free download at extension.oregonstate.edu/catalog (follow the forestry link). Additional information can be found at the National Timber Tax Website (www.timbertax.org) and through the Oregon Department of Revenue (egov.oregon.gov/DOR/TIMBER).
Spend a bit of holiday time considering forestland taxes – it may prove time well spent.
<i>John Punches is the Extension Forestry Agent and Staff Chair for OSU Extension Service in Douglas County. He can be reached by e-mail at john.punches@oregonstate.edu or at 541-672-4461.</i>
Managing family forestlands demand time, energy and expense. The rewards usually come not from big paychecks at the mill, but from the satisfaction of healthy forests, a sense of stewardship and a place the whole family can enjoy. This said, there are some steps you can take to reduce the taxes you pay on your forest management activities.
Minimizing Oregon forestland property taxes is all about the “right” assessment. An assessment is the value applied to real property for taxation purposes. In most cases it is based on the property’s highest-and-best-use value, but woodland owners may request a “designated forestland special assessment” that lowers the assessed value as a means of encouraging them to keep the land in forests. The difference between the specially assessed and highest-and-best-use assessed values can be dramatic. So if you’re maintaining all or part of your property in forests, check into the designated forestland special assessment.
Property assessed as forestland is normally taxed though the Forestland Program. Taxes under this program range from 40 cents to $6.75 per acre, depending on the land’s productivity. It’s a pure land tax (not a timber tax).
It’s the program of choice for persons or companies making regular timber harvests.
Family forestland owners who harvest infrequently may prefer the Small Tract Forestland Option. It features an annual tax just one-fifth the normal amount, but makes up the difference (approximately) through a Severance Tax (currently $4.11 per thousand board feet) on timber harvested from the property.
When it comes to income taxes, I’ve got two words for family forestland owners: business and basis.
If you’re actively involved in your forest’s management, keep good records, and if you can demonstrate a profit motive (even if that profit is unlikely to occur for many years), you can almost certainly meet IRS requirements for treatment as a business. This gives you the greatest ability to claim forest management expenses or losses on your tax return.
Basis refers to the original cost of your forestland investment. When you conduct a timber sale you can reduce the taxable net gain by the amount you paid for the timber – if you know how much of your basis applies to your timber.
Basis is best determined at the time of purchase or inheritance, but it can be determined retroactively if necessary. Knowing your property’s basis could save you thousands of dollars in income taxes – so check with your accountant to see if it has been determined for your property.
Extension has two excellent publications on forestland taxes available for free download at extension.oregonstate.edu/catalog (follow the forestry link). Additional information can be found at the National Timber Tax Website (www.timbertax.org) and through the Oregon Department of Revenue (egov.oregon.gov/DOR/TIMBER).
Spend a bit of holiday time considering forestland taxes – it may prove time well spent.
<i>John Punches is the Extension Forestry Agent and Staff Chair for OSU Extension Service in Douglas County. He can be reached by e-mail at john.punches@oregonstate.edu or at 541-672-4461.</i>
