Accelerate deductions, defer income
The classic year-end move: pay deductible expenses before December 31 and collect income in January where possible. For rentals, this means: prepay January insurance premium (if eligible to deduct under the 12-month rule), order and pay for year-end repairs, and pay property management invoices.
On income timing: if your tenant's December rent arrives in January's mail, it's January income. Do not ask tenants to pay early unless you're in a lower tax bracket this year than next — the reverse can apply too.
Review passive loss position and consider dispositions
Pull your suspended passive loss carryforwards. If you have accumulated losses from a property you're considering selling, selling before December 31 frees them in the current tax year — useful if you also have large capital gains or passive income this year.
If you have a rental that's been a mediocre performer, a tax-motivated sale at year-end can accelerate passive losses and offset gains. Timing matters: a December closing means current-year tax treatment; a January closing shifts everything a year forward. Coordinate with your 1031 exchange timeline if applicable.
Place new assets in service and make elections
Any new appliance, HVAC, or rental-related equipment placed in service before December 31 qualifies for the current year's bonus depreciation and Section 179. Placing assets in service on December 31 still qualifies — you don't need a full year.
Cost segregation studies for properties acquired this year should be completed before filing your return. If you missed making the de minimis or small taxpayer safe harbor elections in prior years, a Form 3115 accounting method change may let you catch up. Review whether the grouping election for real estate professional status should be made or modified before filing.
Frequently asked questions
Can I deduct January's mortgage payment if I pay it in December?
You can deduct the interest portion of any mortgage payment actually paid in the tax year. Paying January's interest payment in December moves that deduction into the current year.
When is the deadline to make depreciation elections?
Most elections (de minimis safe harbor, small taxpayer safe harbor, bonus depreciation opt-out) must be made on a timely filed return — including extensions. The due date is typically October 15 for individuals on extension.
Can I take bonus depreciation on equipment bought December 31?
Yes. Equipment placed in service any time during the tax year qualifies for bonus depreciation for that year.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.