Timber cut from land you own belongs on Line 12, depletion.
Why line 12
Line 12 exists for owners of a natural resource who recover its cost as the resource is used up, and standing timber you own and cut is the clearest case. The deduction is cost depletion: you divide your basis in the timber by the estimated recoverable units, then deduct that rate for the volume actually cut and sold this year. Almost no freelancer, consultant or service business will ever put a number on this line, so if you are not extracting something from the ground or cutting your own trees, line 12 is not your line. Many timber owners are also not on Schedule C at all, because a one-off sale of standing timber is usually a capital gain rather than a trade or business.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so timber cut from land you own lands on Line 12 without you sorting it.
Start for freeWhat timber cut from land you own is confused with
- Line 13, depreciation and section 179 expense deduction
- Chainsaws, skidders and trucks are equipment, so their cost is depreciation on line 13 through Form 4562, not depletion.
- Line 22, supplies
- Fuel, chain oil, blades and other consumables used in cutting are supplies on line 22.
- Schedule E, schedule e, rental real estate
- If you lease the timber rights to someone else and collect royalties instead of cutting, the income and its depletion generally belong on Schedule E.
Examples that belong on line 12
- Cost depletion on 400 cords cut from a woodlot you bought, at your basis per cord
- A tree farmer deducting depletion on the merchantable volume harvested this season
- An owner-operator logging their own acreage and selling logs to a mill
- Depletion on pulpwood removed from a tract you have owned for years
What does not belong here
- Buying logs or lumber from someone else, which is inventory in Part III
- Equipment purchases, which are depreciation on line 13
- Property taxes on the land, which are line 23
- Reforestation and planting costs, which have their own amortisation rules rather than line 12
The limit that applies
Cost depletion only: your total deductions over the life of the property cannot exceed your basis in the resource, and the percentage depletion rates that apply to minerals do not apply to timber.
What to keep
Keep the purchase documents that establish your basis in the timber, a cruise or forester's estimate of recoverable volume, and scale tickets or mill settlements showing the volume cut each year. Depletion without a basis and a volume estimate cannot be computed or defended.
Other expenses on line 12
| Expense | Line |
|---|---|
| a mineral or oil and gas interest | Schedule C, Line 12 |
| gravel or sand extraction | Schedule C, Line 12 |
Related lookups
- Where does capex go on Schedule C?
- Where do job materials go on Schedule C?
- Do rental property expenses go on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so timber cut from land you own lands on Line 12 without you sorting it.
Start for free