Plant trees for tax breaks

Published 10:30 am Saturday, December 10, 2022

By James Cummins

Winter is upon us and many landowners throughout Mississippi will be planting trees on their
property. Most have hopes of eventually enjoying the many benefits of their efforts.
Unfortunately, trees are slow to grow and their benefits are not realized in a short period of time.

However, there is one benefit that a landowner can receive within a year of planting. The Internal Revenue Service (IRS) is willing to give landowners a 10 percent investment tax credit for planting trees. Let’s look at what this could mean.

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Don’t feel bad if you were not familiar with this tax break, there are many Mississippi landowners
that are unaware of this lucrative benefit for planting trees. There are very few tax credits remaining on the books with the IRS. This law, though, has been a part of the tax code since 1980.

The law provides a 10 percent tax credit on qualified reforestation expenditures. The credit is a
direct deduction from the taxes you owe. You can also elect to amortize (deduct) up to 95% of qualified reforestation expenditures over a seven-calendar year period. The amortization may be done in conjunction with the 10 percent tax credit or independently.

One may wonder what qualifies as expenditures when you are planting trees.
According to the tax code, reforestation expenses refer to direct costs paid for establishing the
stand of trees. They would include the costs of site preparation; seeds or seedlings; any chemicals needed to prepare the land; and labor and tools, including depreciation on equipment. Work completed to encourage natural regeneration is also eligible.

Let’s look at an example of what this might mean the next time you plant a few acres of trees. If
you mowed the field, sprayed the rows to be planted with herbicide, added nutrients to the soil, purchased the trees, planted the trees and then placed tree shelters on one-half of the trees,
you can easily spend $2,500 on a three acre planting if all of the above steps are followed.
Thus, with the 10 percent investment tax credit, you could directly deduct $250 from the amount you owe the IRS for that year. You can also then amortize 95 percent of the $2,500 over a seven-year period.

Amortization deductions are subtracted from your gross income. This means that they can be subtracted even if you do not itemize. This little-known tax benefit is easy to use and should be quite an incentive for a landowner to plant trees. Think about it, when does the IRS ever give you the opportunity to reduce your tax liability for something as easy as planting a tree?

Consider planting a few acres of trees using the Forest Land Enhancement Program, Wildlife Habitat Incentives Program, Conservation Reserve Program or the various other programs out there and also take advantage of the reforestation investment tax credit while we still have it.

James L. Cummins is executive director of Wildlife Mississippi, a nonā€profit, conservation
organization founded to conserve, restore, and enhance fish, wildlife, and plant resources
throughout Mississippi. Their web site is