MISSISSIPPI STATE -- A new wrinkle in the tax code allows timber owners to deduct the cost of fertilizer as an ordinary and necessary business expense.

Deborah Gaddis, forestry specialist with the Mississippi State University Extension Service, said before the Internal Revenue Service ruling, fertilizer costs were treated as a capital expenditure and handled differently. Landowners now can deduct this cost all at once, up to certain limits, rather than recovering it over the expected life of the fertilizer, generally three years.

"Allowing forest landowners to deduct the cost of post-establishment fertilization as an ordinary and necessary expense is a sound decision on the part of the IRS," Gaddis said. "This ruling will improve the profitability of forest investment by individuals, which will encourage the establishment and maintenance of privately owned forests."

Gaddis said landowners are using fertilizer on their timber stands more often than in the past, and this tax deduction will benefit them. The IRS is careful to note this deduction applies to fertilizer applied to existing, growing stands of timber. It does not apply to fertilizer put out when the trees are planted.

"Where this fertilization is necessary to establish a new forest, it becomes a reforestation expense eligible for the reforestation tax credit and special early deduction rules," Gaddis said.

The Extension Service offers short courses across the state each year to encourage good record keeping and to help landowners and tax preparers understand the provisions of the timber tax laws. Known as the Timber Tax Fundamentals short course, it is available on demand in counties.

Contact the local Extension county director for more details on the Timber Tax Fundamentals short course.