Has Your Forestry Consultant Discussed Timber Taxes with You?
Owning timber land in Pennsylvania or any other state for that matter bears with it responsibility. This responsibility can come in the form of sustainable conservation, water resource protection and wildlife management. However this time of year, forestry consultants should be providing landowners with information about their tax responsibility for their forest lands.
A Breif Timber Tax Guide
Land, whether you have intentionally purchased it as an investment or not, can be considered an asset for tax purposes. What that means is activities that occur on your forest lands, regardless of whether or not you hire a forestry consultant, are subject to tax responsibility. A good timber tax guide is below. It is produced each year by the U.S. Forest Service to give landowners updates and timber tax tips to the current year.
Tax implications of forest land is not all bad. For instance, tax deferred programs exist to reduce property taxes for lands kept in conservation priorities. Also, certain deductions can be made based on how you define your land management and forestry operation on your taxes. The important point is that you know all the various ways timber land can be accounted for and how to make it work in your favor.
Two Common Timber Tax Tips
The two most common ways taxes come into play with land is through timber sales and cost share distributions.
Selling Timber in Pennsylvania creates income and expenses that have to be claimed on your taxes, specifically on your IRS Form T. Forestry consultants should make you aware of such tax liabilities early on in the process so that at year's end you are not shocked with a high tax bill. Knowing what your timber is worth before going through a timber sale can give you a good idea on how the sale may potentially affect your taxes for that year.
Besides selling timber, the other common timber tax issue for landowners is cost share distributions. Cost share programs are a great resource for landowners to help cover some of the cost for conservation work on their property. However, these payments are counted as income and must be claimed on your yearly tax returns. Work with your forestry consultant to understand how conservation programs impact your land management objectives and financial responsibility.
Reducing Your Tax Liability
Similar to taxes in general, your timber timber tax liability can be reduced through deductions. The amount and type of deductions varies based on how your define your forest land. This is where a tax professional, which we are not and most forestry consultants are not either, should be consulted. To help your accountant, maintain good records throughout the year. Keep track of all expenses (with receipts) and incomes so that all activities related to your timber land can be accounted for.
To wrap up, many land owners do not think land management activities impact their tax responsibility. Having a forestry consultant who is aware of possible tax implications can potentially mean the difference in deciding when and if an activity like a timber sale goes forward. Do not be hit with an unexpected tax bill this year but rather think about the activities and processes now that may impact your bottom dollar.
Spring is not the only Time for Planting Trees for Wildlife
Few, if any, properties out there have all the resources needed for wildlife. Solution? Planting trees for wildlife should be an integral part of your wildlife management plan. Whether it is planting trees for deer or establishing hard mast producers like oaks and hickories for small mammals, do not think that since spring is over you have missed your chance to plant.
Selecting Wildlife Trees to Plant
When planting trees for wildlife, you can be overwhelmed by the choices available. First, stick with native species for your area. The last thing you want is to plant a tree that is invasive, which could destroy your wildlife habitat. Second, do not plant only one species of tree but instead vary the species when planting trees for wildlife. Many woody plants produce soft mast (fruit) or hard mast (nuts) that provide food for a wide range of wildlife species. Selecting a combination of tree species ensures that there will be food supply throughout the year. Planting fruit trees for wildlife for instance provide soft mast for birds, small mammals and deer into the fall while chestnut trees for wildlife add hard mast forage that remains well into the winter. Make sure to include plants that produce fruit that are not highly preferred by wildlife. The reason is to make sure forage is available after all the desirable fruits and nuts are consumed. Examples are hawthorn, crabapple, holly, highbush cranberry and staghorn sumac. They are excellent plants for wildlife because they offer emergency winter food long after the apples and acorns are gone. Finally consider all animals when planting for wildlife habitat. Many reading this are probably interested in planting trees for deer, however, animals such as the larval caterpillars of certain butterflies including the tiger swallowtail and the spicebush swallowtail feed on many different woody species of trees.
Planting Trees for Wildlife is not Always About the Food
Cover is a key pillar of wildlife habitat management. Animals need cover to escape predators, mate and raise their young. In winter, wildlife species need shelter from the cold and wind. Evergreen trees and shrubs make some of the best shelters, especially those which keep their branches close to the ground. They provide shelter for many types of wildlife across the landscape and should be an integral part of your wildlife management plan.
Conifer trees, such as pines and hemlocks, and evergreen shrubs, like rhododendron and holly, make safe, year-round retreats where birds and small mammals can hide from predators and be protected from inclement weather. Diverse types and sizes of trees for wildlife are an integral part of your wildlife habitat management plan, because individual species of wildlife have different preferences in the amount and location of cover. In addition, fallen trees provide cover for salamanders and small mammals. Brush piles and rock piles are sources of cover, nest sites and den sites for many wildlife species as well.
Consider Other Objectives When Planting Trees for Wildlife
Although wildlife is your main reason for planting trees in the fall, you should also consider your other management objectives for your property. For instance, certain tree species are more valuable than others. Depending on what a tree is worth and its potential value in the future, species selection may depend on both wildlife value and financial value based on your wildlife management plan and overall property management plan.
Planting Trees in the Fall
Planting trees for wildlife in the fall avoids transplant shock. Wildlife trees planted this time of year have better growing conditions than those planted in the spring. Typically, trees planted in the spring are faced with unsettled weather and upcoming dry summer conditions that can limit success. In the fall, trees planted for wildlife have stable moisture, humidity and temperature across most parts of the country. Planting for wildlife habitat has much better success rates this time of the year because reduced transplant shock allows the roots time to re-establish before cold weather sets in.
Fall planting of conifers is more risky than planting deciduous trees. Conifers lose moisture from their leaves and needles they hold through the winter. You may want to delay the planting of evergreens until spring. If planting conifers in the fall, keep them watered during times of low moisture. Watering trees and shrubs planted in the fall, particularly conifers, during winter dry periods will greatly increase the odds of planting success.
To wrap up, fall is a perfect time to plant trees. Consider the needs of your property and the goals of your wildlife management plan as fall approaches. Use this opportunity for planting trees for wildlife to enhance your property’s wildlife habitat.
Understanding Timber Value in Pennsylvania
The most common question many Pennsylvania consulting foresters recieve is "What is my timber worth?". The question is often more complex than most forest landowners realize for five reasons.
Five Attributes of Timber Value
First, timber is much like baseball cards or more broadly any commodity with a value to someone else. Local and statewide timber market reports can provide an idea of the level and trends of prices, however, the question what is my timber worth is based mainly on the demand which drives what someone is willing to pay for it. For instance, if your timber grows near a mill with stable demand for lumber, your timber will be worth more.
Second, a timber stand's value is dependent on the composition within it. The species, sizes and qualities of the trees growing on a tract of land all impact the value you would receive from a future timber sale. In Pennsylvania, black cherry is the most valuable species on a board foot basis. Also, sawtimber (those trees greater than 12 inches in diameter) is more valuable than pulpwood (those tree less than 12 inches in diameter). Finally, quality attributes like defects and straightness all determine how much (or less) you may get for your trees.
Third, the value of timber depends heavily on how much timber is sold in one timber sale. This is both the number of trees planned to be harvested and the amount of acreage set to be harvested. Typically, the larger the sale the higher price per unit of wood. With transportation and operation costs at some of their highest is recent years, many timber buyers are reluctant to purchase or offer a premium for timber sales in Pennsylvania of only a few acres.
Fourth, what a timber buyer will pay for your trees depends on the site where the timber is to be harvested. It is expensive to harvest trees and that expense grows, and affects the end stumpage price, where operational costs are high. Variables such as distance from the stand to the nearest road, slope, soil wetness, and whether temporary bridges need to be built across streams all add to operational costs of harvesters.
Fifth and finally, state and local timber harvesting and management practices laws can affect what kind of harvesting equipment can be used, how close harvests can come to streams, and what contingencies must be made if there are local populations of vulnerable or legally protected plant or animal species in your area. Mainly these impact how much and in what ways wood can be harvested on a site. This then goes back to the third point above where reduced trees and limited area reduce the value of a timber sale.
So to answer the question, What is My Timber Worth?, well it depends. Clearly many attributes go into understanding timber value in Pennsylvania. If you are thinking about selling your timber in Pennsylvania, it is best to discuss your options and get a solid estimate on the timber value on your property to ensure the most value from your resource investment.