The difference between site preparation and release has tax implications. Release treatments are deductible the year they occur, with no limitation on amount spent. This will help you qualify your expense into the preferred tax category. Some forest landowners receive cost-share payments from a government agency to reimburse them for reforestation expenses paid. Along with the cost share, landowners also receive IRS Form 1099 stating this is reported income.
Landowners have two options with cost-share payments.
A decision to exclude cost share in taxable income should be based on your own financial situation. There is a limit to the maximum amount of cost share excludable from taxes. One of the two calculation methods is used to determine this limit. On income-producing land, the excludable limit is 10 percent of the average annual income during the past 3 years, divided by an appropriate interest rate. It is the landowners responsibility to find the appropriate interest rate to determine the maximum amount of cost share excludable.