Timber management as a natural resource enterprise
Private forest land owners can enhance their personal income with timber sales from their properties supported by sustainable resource management without sacrificing other land use options.
Selling timber for income may be the most common and traditional income enterprise for many forest land owners. When properly planned and managed, selling timber can be a sustainable source of income from forested land; however, in most cases, it is periodic rather than an annual occurring source of income. Unlike most agricultural crops and endeavors that realize income on an annual basis, most forest harvests are conducted on a schedule with varying numbers of years between harvests. In Michigan, cutting cycles generally range from 10 to 40 years depending on timber types, species and site considerations.
An advantage of timber income is that it is taxed at a lower income tax rate than other sources of income if it meets the requirements to be declared as long-term capital gains. Capital gains are also not subject to self-employment income, i.e. Social Security and Medicare taxes. One key requirement is that the forestland has to be owned for one year or longer. Calculating a depletion allowance for a timber sale can also reduce the amount of timber income that is taxable.
Michigan’s most common timber type, northern hardwoods, is usually managed on a selective basis with harvests conducted on a 10 to 20 year cycle. This single tree selective harvest method is one type of management often referred to as uneven aged management. Faster growing shorter lived species such as Aspen-Birch are most often harvested with more complete harvests on longer cycles of 40 years and are referred to as even aged management. However, under all management plans and harvest schedules the goal should be to not harvest more than the annual growth of the stands being managed.
Timber management and the marketing of forest products can be a complex and confusing issue for many. Forest landowners may want to consider working with a professional resource manager or consulting forester. There is a fee associated in contracting with professionals that can, in many situations, be offset from timber sale revenue. Contact information for consulting foresters can be obtained through the Michigan Forest Association (MFA) or by downloading a free Michigan State University Extension publication titled “Hiring a Consultant Forester.”
If managing timber resources as an enterprise is your goal, delaying your start probably isn’t to your advantage. Although many species of trees are long-lived, the overall forest ecology is very dynamic and ever changing. The sooner forest landowners begin the enterprise process by assessing their stands, the more likely they are to be successful.