Depreciation allows forest landowners to recover the cost of qualifying assets that wear out or become obsolete while producing income.
These include machinery, equipment, vehicles, temporary roads, bridges, culverts, fences, and other improvements used directly in timber production or forest management.
Through annual deductions, the taxpayer gradually allocates the capital cost of these assets over their useful life, matching expense with income.

General Depreciation Rules

Under Internal Revenue Code §167 and §168, most tangible personal property is depreciated using the
Modified Accelerated Cost Recovery System (MACRS).
Timber-related assets generally qualify for five-year or seven-year recovery periods, depending on type and use.
Buildings, bridges, and land improvements follow longer schedules.
Land itself is not depreciable because it does not wear out through use.

• Five-Year Property: logging trucks, skidders, chippers, power saws, planting machines
• Seven-Year Property: heavy equipment, road-building machinery, tractors
• Fifteen-Year Property: temporary roads, drainage, culverts, and similar improvements

Section 179 Expensing

Instead of depreciating an asset over several years, a taxpayer engaged in a trade or business may elect under
§179 to expense qualifying property in the year it is placed in service.
This election is especially valuable for small forest-based businesses because it accelerates cost recovery and simplifies record-keeping.

For tax year 2025, the maximum §179 deduction is $1 220 000, with a dollar-for-dollar phase-out beginning when total qualifying purchases exceed $3 050 000.
These thresholds are indexed annually for inflation.
The deduction cannot exceed the taxpayer’s aggregate business income for the year; any unused amount may be carried forward.

Interaction with Timber Operations

Forest landowners who operate as a business (rather than as investors) may use the §179 election for equipment, vehicles, and machinery directly related to timber production or forest management.
However, costs associated with site preparation, planting, or seeding that establish a new stand must be capitalized into the reforestation account and handled under §194 rather than deducted immediately.

Example

A consulting forester purchases a new forwarder for $175 000 in 2025.
The forester elects to expense the full cost under §179.
If total business income for the year is at least $175 000, the entire amount may be deducted in 2025.
If the machine were instead depreciated under MACRS, only about 20 percent of cost (≈ $35 000) could be deducted in 2025, with the remainder spread over the next several years.

Recordkeeping and Reporting

• Maintain invoices and service records for each asset placed in service.
• Track depreciation by property class and recovery period.
• Attach Form 4562 to the tax return each year depreciation or expensing is claimed.
• When property is sold, remove its adjusted basis and report gain or loss accordingly.

Coordination Notes

• The bonus depreciation percentage (temporary additional first-year deduction under §168(k)) has begun phasing down from 100 % in 2022 to 20 % in 2026 unless extended by Congress.
• Section 179 is elective and separate from bonus depreciation; taxpayers may use either or both within the same year if qualified.
• Assets converted from personal to business use must be valued at fair market value on the conversion date for depreciation purposes.