Green Horizons

As 2006 comes to a close, most people are thinking about the holidays and not about taxes. However, even the Internal Revenue Service can have a giving spirit when it comes to tax bene.ts for private forest landowners. New for 2006, the Conservation Security Program (CSP) has been added to the list of small watershed programs that qualify for the section 126, Cost Share Exclusion. This means that all or a portion of cost share payments received under this program can be excluded from taxable income. In 2005, cost share payments received under the Conservation Reserve Program (CRP) were also included in the list of small watershed programs qualifying for section 126 treatment.

Another change was the increase in section 179 deduction dollar limits. Section 179 property is tangible personal property used more than 50 percent in a business or trade. The maximum amount that you can elect to deduct for section 179 property placed in service in 2006 is $108,000. This limit is reduced by the amount by which the total cost of section 179 property placed in service during the year exceeds $430,000. Qualifying property includes machinery and equipment, agricultural structures, and single purpose horticultural structures.

Finally, the Reforestation Amortization and Deduction rules changed in 2005 but should be mentioned again for 2006. Under section 194, Reforestation Amortization and Deduction, a landowner may deduct up to $10,000 of reforestation or afforestation expenses incurred during the year on each qualifying property. Additional reforestation or afforestation expenses above the $10,000 limit may be amortized over an 84-month schedule. Those expenses include site preparation; seedling and seed costs; labor and tool expenses; depreciation on equipment used for seeding or site preparation; and replanting costs. In order for a property to qualify it must be at least one acre in size and located in the United States. Potentially, a landowner with fifteen acres could have fifteen qualifying tracts, each with a $10,000 deduction limit and the associated amortization.

For more information about these and other tax changes visit the National Timber Tax web site at www.timbertax.org, or obtain a copy of the Farmer’s Tax Guide, Publication 225, Department of the Treasury, Internal Revenue Service (www.irs.gov).