Should I Sell My Timber Now to Avoid Possible Changes in the Tax Laws?

Posted On November 27, 2012— Written By

NC State University Extension Forestry staff have put together the following news release to address a concern that has been brought to our attention. There have been several landowners who have been approached about selling their timber now in order to avoid possible changes in taxes. We feel this is a ploy being used by some unscrupulous buyers to convince uninformed landowners about selling their timber.

Are you considering completing a timber sale before year’s end to avoid any new or unknown taxes such as the 3.8% Medicare surcharge on investment income from the Obama-care for taxpayers with income over $200,000 (single, head-of-household filing statuses) and $250,000 (married filing a joint return), and perhaps a 5% increase in the long-term Capital Gains Rate?

Selling under any level of uncertainty is never a good idea. Taxpayers should be clear in their goals relative to how property is held; as an investment (most landowners fall in this category) or as business property because income tax results differ. Owning timber for timber production is a long-term investment and so deciding when to harvest should be based on sound economic decisions. Timber, even unmanaged stands, is increasing in value, earning interest at rates comparable to other investments. For example, hardwood timber growing at 2% per year (typical of an unmanaged hardwood stand – a well-managed one can grow over 5%/year) can expect a return on the investment of approximately 6% based on the timber’s growth rate and quality. The time to harvest timber should be based on financial maturity, not on potential changes in tax policy. So the time to harvest your timber should be based on your goals and objectives, your level of risk, and on the financial maturity of the timber.

For more information on selling timber please look at the Spring 2012 Issue of National Woodlands Magazine and read the article “When to Cut Your Woodland”. Also check out the Extension publication Timber Sales: A Planning Guide For Landowners (AG-640). For more information on forestry in general, visit Chatham County Cooperative Extension’s Forestry web page.

Written By

Photo of Debbie Roos, N.C. Cooperative ExtensionDebbie RoosExtension Agent, Agriculture - Sustainable / Organic Production (919) 542-8244 debbie_roos@ncsu.eduN.C. Cooperative Extension, Chatham County Center
Updated on Nov 27, 2012
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