Abstract
Financial effects of the Tax Cuts and Jobs Act of 2017 (TCJA) on private noncorporate timber growers vary due to the difference in timber holdings, level of non-timber income, and intensity of forest management. This commentary reports on a financial analysis, which suggests that landowners holding timber as investments as a group are moderately worse off due to the changes in itemized deductions brought by the TCJA. The distinction in the net benefits of timber holdings becomes more significant between forest investors (as a group) and material participants. This may become an incentive for some investors to consider converting to a business and intensifying their forest management to meet the material participation requirement. Some investors, on the other hand, may reduce forest management costs or divest their timberland due to deterioration in profitability. It also suggests that owning and managing timber becomes less beneficial in terms of tax savings for forest landowners with moderate and high non-timber income (except for high income, large holding scenario) under the new law than under the prior law.
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