So you had a timber sale and not sure what to do about the taxes? Most of my clients think they should claim it as personal income. In most cases this would not be wise. The sale of timber is considered long term capital gains as long as you have owned it for a year. In that case its taxed at the 20% flat rate and possibly lower depending on your personal income. The good news is that the 20% rate can be offset by knowing your timber basis.
Timber basis is the fair market value of the timber at the time you purchased it. Its important to get the timber appraised when you purchase property to help offset taxes later. Capital gains is taxed on profit. If your timber is worth $10,000 at time of purchase and several years later you sell it for $12,000, you have a profit of $2,000. This is the amount you would pay the 20% rate on. This is an over simplified example but it can show you how to minimize your tax.
Let us help you establish you timber basis so you too can minimize your tax exposure in 2015. We are here to help.
