Water is the subsistence of human beings and it can be conserved by forests. The water conservation value is a kind of indirect use value. With the continued consumption of natural resources, the problem of water scarcity has been becoming important. Estimating the value of water conservation becomes critical to investigate the sustainable use of water resources by forest. However, estimating the value of water is difficult. The estimates are easily affected by many factors, such as climate, topography, and data sources. Therefore, it is challenging to estimate the value of water accurately in a practical way. In this study, a water balance model with replacement cost is adopted to estimate the value of water conservation in eight national forest districts in Taiwan. The estimated water conserved in the national forest districts is approximately 29,967,841,946.00 m3 annually and the average cost for reservoirs is NT$ 0.10/m3. The economic value of the water stored in Taiwan’s national forest districts is estimated to be NT$ 3,102,671,667.08 per year. The result of this study indicates that the capability of conserving water by forests conforms to rainfalls generally. In addition, the discounted cost of each reservoir in Taiwan has large variations in the assessment process. This study also suggests that we should consider water sources, in addition to the data scale, to improve the estimation accuracy.