FAQs: Timber Management and Taxes

Thinning depends on your objectives. Are you managing for timber? For wildlife? For recreation? When thinning for timber particularly, you’ll want to thin when the growth rate slows due to crowding of the trees or other reasons. Thinning should remove poorer quality trees and open the forest canopy so that light can enter. The new sunlight will allow the remaining superior trees to grow more rapidly in diameter, stimulate the growth of new ground vegetation, and cause changes in wildlife habitat. The same thinning practices that improve timber growth also can improve wildlife habitat by allowing the crowns of desirable mast-producing trees (ex. oak, walnut) to expand and ground vegetation to develop. Consult a professional forester to discuss the timing and need for thinning.

The harvesting process varies, depending on the type and volume of trees, the terrain and ground conditions, the time of year, and the logger’s equipment and schedule. Harvest contracts usually are for one year, with harvesting taking any amount of time therein, frequently 6 months to one year. Be certain that you have a written timber harvest contract and that an allowable time for harvesting is spelled out. Consider whether you want the income in one year or spread over two or more tax years. Engage a consulting forester to assist with and assure a quality timber harvest process from beginning to end. A list of licensed consulting foresters in Maryland can be found in our publication, Maryland Consulting and Industrial Foresters Directory.

For higher quality timber, harvesting should take place in the winter. There is less water in the trees which minimizes fungal staining. Harvesting at other times is a standard practice, depending on weather and soil conditions and other activity in the area of the harvest.

Forests and trees reduce air pollution by absorbing gaseous pollutants and filtering dust, ash, and smoke. A dense grove of trees about 50 feet wide reduces apparent loudness of noise by as much as 50%. Forests and trees buffer glare caused by lights and the sun, provide wind protection, and cool the air. They provide habitat for wildlife and improve the quality of our lives. To see the national average of how trees save on air conditioning costs and erosion costs, for example, visit Maryland DNR Forest Service's The Value of Urban Trees.

The timber value of trees varies depending on the species, size, volume, and many other factors. For a listing of recently sold timber, check out the latest stumpage price report at The Penn State University Extension's Timber Market Report. The University of Maryland Extension no longer tracks stumpage prices. Please note that Pennsylvania prices may not apply to Maryland or to other surrounding states.

We suggest using a logger who has completed the volunteer Master Logger Program. Most loggers are concerned about maintaining the quality of your land and forest. However, by choosing a Master Logger, you are hiring someone who has received training to enhance understanding of Best Management Practices and timber harvesting method options, to increase awareness of state laws and regulations governing forest operations, and to increase safe logging practices. The Maryland-Delaware Master Logger Program is a voluntary program. Loggers who have completed the program have done so in order to improve their knowledge of science and the environment within an often misunderstood profession. Learn more about the Maryland-Delaware Master Logger Program here.

Most landowners are inexperienced in working with loggers and should use the services of a professional forester to represent their interests. The increased sale price of your timber will more than offset the consulting forester’s fee. The forester also will monitor the timber harvest, assuring a healthy forest when the harvest is complete. Consulting foresters licensed to practice in Maryland can be found at in our publication, Maryland Consulting and Industrial Foresters Directory. To help you understand timber prices, go to The Penn State University Extension's Timber Market Report. The University of Maryland Extension no longer tracks stumpage prices. Please note that Pennsylvania prices may not apply to Maryland or to other surrounding states.

Some Certified Public Accountants and professional foresters have experience in this area. Regardless of who you hire, obtain a copy of the USDA Forest Service's Agriculture Handbook No. 731, “Forest Landowners’ Guide to the Federal Income Tax,” and provide it to your tax preparer. The publication is nearly 160 pages and is available in PDF format here.

It depends on whether your timber sale will put you in a higher tax bracket. In some instances, it is advised that landowners spread their income over more than one tax year. If certain requirements are met, timber harvests can be treated as capital gain rather than ordinary income. This usually is advantageous to the taxpayer. For more information, consult a tax preparer knowledgeable about forestry, and visit the National Timber Tax Website.

Income from timber harvesting can be treated as capital gain or ordinary income. Forest economists recommend reporting it as capital gain since capital gain is taxed at a lower rate than ordinary income and, unlike ordinary income, is not subject to self-employment tax. When planning timber harvests, forest landowners should consider if it would be advantageous to receive all the income in one year or to spread it over two or more years. A consulting forester can build this into a contact with whoever purchases your timber. For more information, see the National Timber Tax Website.

First try to resolve any disputes with the forester or logger who is as concerned about protecting his or her reputation as you are about having a satisfactory resolution. Engage a mediator if needed.

It depends on the soil, slope, and amount of acres being drained.  Every timber harvest that disturbs more than a 0.25 acres must have a standard erosion and sediment control plan prepared for the site. For more information, read Maryland DNR Forest Service's "Standard Erosion and Sediment Control Plan For Forest Harvest Operations in Maryland."