Tax Reform Takeaway -- A Few Highlights

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Thanks to our friends at the Forestry Association of South Carolina, we thought it would be a good idea to bring a recap of some highlights of the tax reform bill that could impact forest landowners. Even though a main goal of the "Republican tax reform plan" was to simplify the tax code, it still seems mighty complex to the writer of this blog post (a small-town, Horry county gal)!

  1. The Corporate tax rate drops from 35% down to 21%.
  2. Owners of pass-through entities (such as an LLC) will get a 20% discount on individual tax rate for the first $315,000 of joint income.
  3. The estate tax (aka, the death tax) is maintained -- ie NOT REPEALED --, but current exemption levels are doubled. The current stepped-up basis rules still apply.
  4. Property, state and local tax deductions are limited to $10,000 for all three combined. This seems like a negative for landowners, particularly those in a high-tax state.

    Perhaps the most specific one as it relates to timber folks:
  5. Current tax code provisions that provide incentives to forest owners are maintained. Some of these incentives encourage landowners to keep their land in trees due to the capital gains treatment of timber revenue, deductions for timber-growing costs, and continues deductions and amortization of the costs of reforestation. Deductions for "forest management costs" such as pest / disease / fire prevention, thinning, fertilization, protection of wetlands & wildlife are still in place.
  6. Individual tax cuts are set to expire in 2025; corporate tax cuts are permanent.

These changes are coming for the 2018 tax year. We are NOT tax professionals or accountants here at Johnson Land & Timber. Any information here is simply given as an interpretation of reading and studying to try to navigate our taxation system in these great United States. If reading this has sparked a question, please ask a trusted professional in the "tax" business.