Year-End Last-Minute Strategies to Maximize Deductions

6 Minute Read

As the year draws to a close, smart tax planning can make a major difference in your bottom line, especially for real estate investors. Strategic year-end moves can reduce taxable income, accelerate deductions, and position your portfolio for a stronger financial start in the new year.

Here’s a look at several last-minute strategies to consider before December 31st.

1. Accelerate Deductions and Defer Income

If you’re on a cash basis, one of the simplest ways to manage your taxable income is to prepay certain expenses before year-end. Consider paying property taxes, insurance, or repairs in advance if they qualify as deductible business expenses.

Likewise, if you’re expecting rent payments or closing income, it may make sense to defer income into the following year, as long as it aligns with your overall tax strategy and cash flow needs.

2. Leverage Bonus Depreciation and Section 179

The current tax landscape offers powerful depreciation tools. Through bonus depreciation and Section 179 expensing, you may be able to write off significant portions of qualified property improvements or equipment in the year they’re placed in service.

If you’ve recently purchased new appliances, HVAC systems, or office equipment for managing rentals, these may qualify. But timing is crucial, the asset must be placed in service before year-end to claim the deduction.

3. Use Cost Segregation to Unlock Hidden Deductions

A cost segregation study can help identify components of your property that qualify for shorter depreciation schedules, accelerating deductions and improving cash flow.

Even if you’ve owned a property for several years, a look-back study can recapture unclaimed depreciation, a powerful year-end move that could free up thousands in tax savings.

4. Review Passive Loss Limitations

If you have passive losses that are limited this year, evaluate whether you can materially participate in your real estate activities. Meeting the IRS’s real estate professional test or grouping certain activities could allow more losses to offset other income.

Additionally, if you anticipate selling a property, strategic timing could allow you to free up suspended losses tied to that asset.

5. Consider a 1031 Exchange for Deferrals

If you’ve sold or plan to sell an investment property, you may be able to defer capital gains using a 1031 exchange, reinvesting proceeds into a like-kind property. While the deadlines are strict, planning the exchange before year-end ensures compliance and maximizes deferral opportunities.

6. Harvest Capital Losses

If you hold underperforming investments outside of real estate (like stocks or REITs), tax-loss harvesting can offset capital gains from profitable real estate sales. This can help reduce your overall tax exposure for the year.

7. Review Entity Structure and QBI Deduction

Entity selection can directly impact your year-end taxes. Many investors benefit from LLC or S-Corp structures that qualify for the Qualified Business Income (QBI) deduction, up to 20% of eligible income. Reviewing your entity type before the year closes could open additional opportunities for 2025.

8. Maximize Retirement and Health Accounts

Don’t overlook personal strategies that benefit real estate investors too, like maximizing contributions to Solo 401(k)s, SEP IRAs, or HSA accounts. These can reduce taxable income while supporting long-term wealth building.

9. Plan Ahead with Your CPA

Every investor’s situation is unique. A strategic review with a CPA who understands real estate can uncover timing-based deductions, carryforward opportunities, and cash flow implications that fit your portfolio.

With proactive planning, the last few weeks of the year can yield lasting tax benefits.