How Savvy Timberland Owners Save Money At Tax Time
Every year thousands of landowners in Vermont and New Hampshire willingly give away more money to the government than they should. This is done by paying higher taxes on revenue generated from their timber harvest(s) - than they are legally obligated to.
Many do this because they either don’t hire a licensed NH forester to act as their representative during the process or the forester they have hired has failed in his or her fiduciary responsibility. Either way they are not aware of less known provisions available to them for reducing their timber income taxes.
Importance of having the right numbers
A key component to retaining the maximum amount of money that you are entitled to is to have access to the right numbers. In turn these figures will allow your accountant to capture the correct deductions at tax time. The Basis figure is one of those “right numbers”. It is a measurement for determining a landowner’s investment in their forested asset. By determining these base numbers, your forester can generate a depletion figure which will reduce significantly the amount of your taxable gain generated from your future timber harvest.
Why being a savvy landowner pays
For an illustration lets view the following figures from a hypothetical timber sale. For sake of illustration we will assume both landowners have owned their property for 5 years and acquired it via a real estate purchase.Regular landowner:
Sales Income- Sales Expense = Taxable Gain
$34,000 – $ 7,000 = $ 27,000
Sales Income –Sales Expense- Basis Figure= Taxable Gain.
$34,000 – $7,000 - $18,000 = $ 9,000
Guess whose going to make out better at tax time? You guessed it : The Savvy Landowner. They will pay capital gains on $ 9,000 vs. $ 27,000. That is a potential savings of $ 2,700.
Act now to capture your savings
So the question may now be – what do I need to do get Basis numbers for my forested property? If you have recently purchased your property call the professionals at Stillwater Forestry LLC. Once we perform a Timber Valuation we will have the numbers ready to determine your depletion value. So, when it comes time to harvest your timber and generate some income - you will join the ranks of the savvy landowners who aren’t left paying more on taxes then they should.