What Capital Recovery Covers

Capital recovery is the set of tax provisions that allows forest landowners to recover their invested costs over time. In practice, these provisions reduce taxable income or directly reduce tax liability as timber is established, grows, is harvested, and as equipment and improvements are used. This section organizes the four primary methods used in forestry and points to detailed guidance for each.

• Depletion of Timber — recovering the timber basis when timber is sold or harvested.
• Reforestation Amortization — spreading qualifying reforestation costs across prescribed years.
• Reforestation Investment Tax Credit — claiming a direct credit for qualifying reforestation expenses; interacts with amortization.
• Depreciation and Section 179 — recovering costs for equipment and qualifying improvements used in forestry operations.

When and Why Capital Recovery Matters

• At acquisition: establish and document basis allocations across land, timber, equipment, and improvements.
• During reforestation: record qualifying costs and select the appropriate mix of credit and amortization.
• During operations: track equipment and improvement costs for depreciation or Section 179 expensing where applicable.
• At harvest or sale: apply depletion so taxes are levied on profit rather than gross receipts.

If you are new to this topic, begin by confirming your basis records and how those values flow through each recovery method. If you already maintain basis accounts, proceed directly to the specific method below.

How the Pieces Fit Together

1. Establish Original Basis — allocate purchase price across asset classes (for example, land, timber, equipment, improvements). See the site’s basis materials and calculator.
2. Maintain Accounts — record reforestation, improvements, and equipment additions accurately by date and purpose.
3. Apply Recovery Methods — use depletion, amortization, credit, and depreciation according to eligibility and timing rules.
4. Document — retain workpapers and supporting schedules for filings and audits.

Topics in Capital Recovery

Select a topic to view detailed guidance, worked examples, and references.

Tools and Worksheets

Use the site’s calculators and worksheets to prepare your schedules. The Reforestation Credit and Amortization tool demonstrates the interaction between the credit and amortization over time. Basis materials support accurate starting values for depletion and depreciation schedules.

This content is educational and is provided to help landowners and appraisers organize records and understand the purpose of capital recovery methods. Consult your tax professional regarding current rules and filing requirements.