Understanding Capital Recovery in Forestry
Forest landowners can recover the costs of their investments through several provisions of the U.S. tax code. These provisions allow the cost of timber, reforestation, and improvements to be deducted from income or credited against taxes over time.
There are four primary methods of capital recovery used in forestry:
- Depletion – Recovering the original cost basis of standing timber as it is harvested or sold.
- Amortization – Spreading reforestation costs over multiple years after establishment.
- Tax Credits – Taking direct reductions in tax liability for qualifying reforestation expenses.
- Depreciation – Recovering costs for machinery, buildings, or road improvements through annual allowances.
Each of these methods reduces tax liability in a different way. Select a topic below to learn more.