03/04/2026
DID YOU KNOW: The classification of your forest ownership affects your applicable tax rates, the deductions you can claim and filing requirements.
Your forest property generally falls into one of three categories:
1. Personal use or hobby. You own the property primarily for personal use, enjoyment, or hobby, rather than to earn money.
2. Investment. You intend to make a profit from the property either from timber income or asset appreciation (profit motive); however, your activities and involvement do not rise to the level of a trade or business.
3. Trade or business. You have a profit motive, and your forestry activities are conducted in a business-like manner. Your involvement in the business may be material participation or passive (determined annually). Material
participation implies regular, continuous, and substantial involvement and typically results in greater tax deductions and faster cost recovery. Losses from passive activities can only offset passive income.
Read more Tax Tips for Forest Landowners (2025 Tax Year):https://www.fs.usda.gov/land/taxtips.pdf