Recognizing that growing timber is a long-term, often high-risk investment, the federal government offers tax incentives to private, non-industrial landowners to encourage them to grow timber and reforest lands after timber harvest.
Tax implications and incentives associated with forestland ownership, especially related to reforestation expenses and timber harvest income, are described in the U.S. Forest Service Southern Region's annual publication, Tax Tips for Forest Landowners. Reforestation tax credit and amortization provisions are one of the few long-term incentives available to landowners for growing trees. The publication contains an example of how these incentives work and how landowners may claim them when filing federal income tax forms. It also contains a brief overview of capital gains tax treatment of timber income and how to handle cost-share payments.
The National Timber Tax Website is an excellent source of information on forest taxation issues. More detailed information and assistance should be obtained from a professional tax adviser familiar with timber tax treatments.