Tax and business considerations
Managing a forest involves more than just growing trees. For example, when it’s time to harvest, do you know the basic components of a contract? Should you hire an accountant or tax professional? Preparing taxes can be confusing and frustrating, with complex rules that seem to change just as you figure them out.
Fortunately, there are business practices and strategies that can help you minimize expenses, increase revenues and protect your investment. No matter what your property goals, there are resources and tools to guide you every step of the way.
Let us help you better know your forest and navigate the business side of forestry with confidence. Please start by watching this quick video for an introduction to topics such as contracts, taxes and succession planning.
Selecting the right service provider
Partnering with professionals such as foresters and loggers is one way to ensure a successful timber harvest and long-term forest health. A professional forester can evaluate your forest, determine timber value, develop tailored management plans, guide you through regulations, and connect you with reliable contractors and log buyers.
Similarly, professional loggers bring expertise in sustainable forestry practices, environmental stewardship and compliance with forest management laws. By working with these experts, you can simplify the timber sale process, achieve better outcomes and protect your forest for future generations. Learn more about this process by visiting the logging and selling timber page on this website.
If you’ve decided you’re ready to begin harvesting timber, selecting the right tax preparer is just as important as choosing a logging contractor. A knowledgeable tax preparer familiar with forestry-related tax laws can help you navigate deductions, capital gains and other considerations unique to timber sales. Proper tax planning can maximize your earnings while ensuring compliance with state and federal regulations. For more tips, visit the Oregon State University (OSU) publication Choosing the Right Service Provider for Your Family Forest: Accountant or Tax Preparer.
Contracts
Before starting a harvest, having a clear and comprehensive contract is essential. A well-written contract protects both you and the contractor by outlining expectations, timelines, payment terms and responsibilities. It can help prevent misunderstandings and ensure the operation aligns with your management goals. For guidance on drafting or reviewing contracts, check out the OSU publication Contracts for Woodland Owners.
Timber Harvest Taxes
Timber harvested in Oregon may be subject to more than one type of tax. Understanding which taxes apply to you, and when they are due, can help you plan and avoid surprises.
Forest Products Harvest Tax (FPHT)
Most landowners pay the Forest Products Harvest Tax, which is based on the total volume of timber harvested each year (measured in thousand board feet, or MBF). The first 25 MBF you harvest annually is excluded from the Forest Products Harvest Tax.
The Oregon Department of Revenue sends these tax forms in January for the previous year’s harvest, and the return is due April 15. All landowners must file a return, even if they harvested less than 25 MBF and no tax is owed.
For current tax rates, forms, and instructions, visit the Oregon Department of Revenues Timber Harvest Tax webpage.
Small Tract Forestland (STF) Severance Tax
If your property is enrolled in the Small Tract Forestland Program, you will also pay a severance tax when timber is removed. This tax replaces part of your annual property tax and like the Forest Products Harvest Tax this is calculated on a per-MBF basis.
Small Tract Forestland landowners must report harvests to the Department of Revenue and pay both the severance tax and the Forest Products Harvest Tax.
For current tax rates, forms, and instructions, visit the Oregon Department of Revenues Timber Harvest Tax webpage.
Common Questions About Timber Harvest Taxes
Do I need to file a Forest Products Harvest Tax return even if I harvested very little?
Yes. Every landowner must file the Forest Products Harvest Tax return, even if the harvest was under 25 MBF and no tax is owed.
Do STF landowners owe both taxes?
Yes. If you enrolled in Small Tract Forestland, you will pay the severance tax and the Forest Products Harvest Tax.
When are forms sent out?
Department of Revenue mails FPHT and STF forms in January based on the Notification of Operation filed with the Oregon Department of Forestry.
When are taxes due?
Returns and payments are due April 15 of the year after the harvest.
Do I need to make quarterly payments?
Possibly. Landowners with larger harvests may need to make quarterly estimated payments if they expect to owe $1,500 or more in harvest taxes for the year. Most small woodland owners will not meet this threshold.
What if I need help with the numbers?
Your logger, forester, or the mill can provide the harvest volume and scale information you need to complete the tax forms.
Are These Taxes and Logging Expenses Deductible?
Yes. Many costs related to a timber harvest can be deducted on your federal income taxes. Logging expenses, such as harvesting, hauling, and forester fees, are deducted in the same year you report your timber sale income.
In contrast, harvest taxes like the FPHT or STF severance tax are deducted in the year you pay them, which is usually the year after the harvest.
A tax professional familiar with forestry can help you determine which deductions apply to your situation and how to keep good records.
Taxes and forestry
Navigating taxes can be one of the most challenging aspects of managing your forestland. From timber sales to estate planning, understanding the tax implications of various actions is crucial to maximizing your financial benefits and protecting your investment. Below are key resources to help you understand and manage the tax considerations associated with your forestland:
Selling Timber and Logs
This resource offers guidance on understanding tax implications and best practices for selling your timber and logs.
Federal Tax Treatment of Timber Income and Expenses
Take an in-depth look at federal tax rules for timber-related income and expenses.
Forestry Tax Incentives
Learn about tax incentives available to forest landowners in this video.
Taxation of Forestry Income
This video guide educates landowners about income taxes related to forestry operations.
Forest Landowners Tax Council’s Basics of Basis
This helpful video gives an overview of tax basics for forest landowners.
2022-23 Forests + Climate LES: Tax Dimensions of Forest Carbon Projects
Many forest landowners are excited about the potential to receive payments for carbon. What can’t get lost in the discussion is how this income should be reported on a tax return and whether it will affect property taxes. This video discusses the relevant federal income tax implications for forest carbon credits, as well as potential issues related to state taxes.
Tax Planning for Forestry Operations
This video provides information on integrating tax planning into your forest operations.
ADDITIONAL RESOURCES
VIDEOS
Your Property Taxes and Your Forestland
Learn about property tax through this informational video from the Clackamas County Assessor’s Office.
Oregon Small Woodlands Association Forestry Taxation Series
This seven-part series helps teach you everything you need to know about forestry taxation.
OTHER
In the Woods podcast — Episode 16: Taxes For Woodland Owners
In this episode, Jacob Putney and Tamara Cushing discuss woodland taxation and finance. Cushing is the extension forest business and economics specialist at the University of Florida.