IRS Tax Deductions for Landscape Tree Losses

Unfortunately many people in this area have been affected by severe drought even to the point of losing huge landscape trees. When a devastating drought has hit your property you do lose trees and many people don’t realize that trees add value to property and as such qualify you for a greater loss than you may have thought. The Texas Forest Service (TFS) has provided some reminders for anyone affected by natural disasters and Texas has had its share this year. Although neither TFS nor I are tax experts, just bringing up the subject may help you get some tax relief if you have had a loss.
When it comes to acceptable techniques and methods for valuing landscape tree loss for federal income tax deductions, there are hardly any definitive languages available from the tax law or the rules and criteria by the IRS. Analysis and appraisal of landscaping and real estate is complex and requires professional training and experience. The best course of action or defense a taxpayer can use is to work with a professional (real estate appraisers and professional arborists) and diligently document the value determination in a detailed and accurate manner.
The income tax law for a casualty loss deduction requires that the amount of deduction is limited to the smaller of (1) the decrease in fair market value (FMV) before and after the disaster or (2) the adjusted basis of your property. Salvage sale (this would generally be available for pine trees in East Texas but not here in Williamson County) further reduces the deductions allowed.
One of the most authoritative rulebooks used by the professional arborists is the Guideline for Plant Appraisal, 9th Edition. According to this guide, "variations of Cost Approach (Replacement Cost, Cost of Repair, Cost of Cure) and the Market Approach more closely follow the IRS criteria and standards."
The problem with the cost of restoration/replacement/repair is that this approach can be practically impossible for many cases. For example, the cost of replacing a 60-year-old live oak tree is difficult to estimate, if not impossible. Due to practical reasons, a competent professional appraisal is frequently used in establishing the value of landscape trees for tax purposes.
The Market Approach (comparable sales) used by professional arborists also more closely follows the IRS criteria. However, the comparable sale method is extremely difficult to use when nearby property was also damaged. The Guide cautions that "the Market Approach should be coordinated with qualified, licensed real-estate appraisers." A real-estate appraiser as well as professional arborists may be necessary. Trees and shrubs on a residential property that are destroyed must be appraised together with the real estate. Business property must separately value the trees and the building.”
I hope this helps if you have landscape tree damage. If you want a listing of professional arborists or want to contact the Texas Forest Service just give me a call.