When and How Can I Claim Reforestation Tax Benefits?

You’ve checked the requirements and found you’re fully eligible – you can take a deduction and amortization. Now what?

First, you need to know your total reforestation-related costs for the year. 

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Credit: Shutterstock

• If they add up to less than $10,000, you can take a deduction equal to your total costs on your tax return.
• If they add up to more than $10,000, you can take a $10,000 deduction on your tax return, and amortize the amount left over.

Let’s say your total expenses are $25,000. That means you have $25,000 - $10,000 = $15,000 left to claim after the $10,000 deduction. That $15,000 remainder must be amortized over 84 months, starting with the first day of the first month of the second half of the tax year (for most taxpayers, that means July 1^st).

What does that look like on your tax return? That first return will show a deduction of $10,000 plus the first 6 months of amortization of your remaining $15,000. For years 2-7, you’ll show a deduction of 1/7^th of $15,000. And in tax year 8, you’ll show a deduction of that last 1/14^th of $15,000.

Making sense of the math can be tricky, and that’s one reason that good recordkeeping is a must. Another reason is that the IRS requires it. To claim your tax benefits, you’ll need to fill out a specific tax form and include a statement containing:

• a description of your costs and the dates you incurred them
• a description of the type of timber you grow on your land and the purpose for which you grow it

This will be much easier to do if you’ve kept careful records. There are other tips to help you make the most of your benefits, as well.