Year-End Tax Checklist for Real Estate Investors

By Tom, CPA · Updated October 27, 2026

Part of: Rental Property Taxes

TL;DR: Before December 31, 2026: place planned improvements in service, decide on repairs and safe harbor elections, check passive loss and real estate professional hours, time any sale, collect W-9s for 2027 Forms 1099, and make the January estimated payment. In January: issue 1099-NECs by February 1, 2027 and close the books.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

December is the last chance to change your 2026 rental numbers. Most of the moves below are about timing: when a property or improvement is placed in service, when a sale closes, when an expense is paid. Work through the list property by property. Figures are 2026 federal amounts as of October 2026.

CPA Warning Label: Year-end moves that accelerate deductions can increase recapture later and often only help if the passive rules let you use the loss. Run a projection before acting.

Depreciation and improvements

• [ ] Placed in service by Dec 31? Depreciation starts when property is ready and available for rent, not when you buy it (IRS Publication 527). A property listed for rent on December 20 gets a half-month of December depreciation under the mid-month convention.
• [ ] Bonus depreciation: 100% bonus is permanent for qualified property acquired after January 19, 2025, such as appliances, furniture and 15-year land improvements (IRS Notice 2026-11). Decide whether to take it or elect out by class.
• [ ] Cost segregation: for a property bought this year, a study completed before you file can reclassify components for 2026.
• [ ] Missed depreciation: if past years were missed, plan a Form 3115 with the 2026 return.
• [ ] Partial dispositions: if you replaced a roof or HVAC system, consider writing off the old component's basis.

Repairs and elections

• [ ] Repairs that are truly repairs are deducted when paid; schedule them before year end if you want the deduction in 2026.
• [ ] De minimis safe harbor election ($2,500 per item or invoice without an applicable financial statement) on the 2026 return.
• [ ] Safe harbor for small taxpayers for buildings with unadjusted basis of $1 million or less, if total repairs and improvements stay at or under the lesser of $10,000 or 2% of basis (IRS tangible property regulations FAQs).
• [ ] Routine maintenance safe harbor for recurring work you expect more than twice in 10 years.

Passive losses and status

• [ ] $25,000 allowance: estimate MAGI. The allowance phases out between $100,000 and $150,000 (IRS Publication 925). A deductible retirement contribution may lower MAGI.
• [ ] Real estate professional: more than 750 hours and more than half your personal service time in real property businesses, with material participation. Update the hours log now.
• [ ] Short-term rentals: if average stays are 7 days or less, check material participation hours, such as 100 hours and more than anyone else.
• [ ] Grouping election if you have multiple properties and want them treated as one activity.
• [ ] Suspended losses: know your carryforward; a fully taxable sale releases it.

Sales and exchanges

• [ ] Closing date: a sale closing December 31 versus January 2 lands in different tax years. Pick the year with lower income if you can, and remember the gain can push other income into higher brackets and over the NIIT threshold.
• [ ] Capital gains brackets: for 2026, the 0% rate applies up to $98,900 of taxable income for joint filers and $49,450 for single filers (Rev. Proc. 2025-32).
• [ ] 1031 deadlines: 45 days to identify and 180 days to close, or the due date of the return including extensions if earlier. For a late-2026 sale, extend your 2026 return if needed to keep the full 180 days (IRS like-kind exchange guidance).
• [ ] Installment sales: depreciation recapture is still recognized in the year of sale (IRS Publication 537).
• [ ] Section 121: for a former home now rented, check the 3-year window after you moved out.

Payments and information returns

• [ ] Fourth-quarter estimate for 2026 is due January 15, 2027 (IRS Publication 505). Safe harbor: 100% of 2025 tax, or 110% if 2025 AGI exceeded $150,000.
• [ ] Forms 1099-NEC: for payments made in 2026 to contractors in a rental trade or business, the threshold is $2,000 (IRS Instructions for Forms 1099). Forms are due February 1, 2027, since January 31 is a Sunday.
• [ ] W-9s: collect them now from every contractor you paid.
• [ ] Property tax and insurance: a cash-basis owner deducts what was paid in 2026, including escrow disbursements shown on Form 1098.

Records to gather

• [ ] Rent ledgers and bank statements for each property.
• [ ] Form 1098 mortgage interest statements and closing disclosures for any purchase, refinance or sale.
• [ ] Receipts sorted into repairs versus improvements, with dates placed in service.
• [ ] Mileage and travel logs.
• [ ] Hours logs for material participation or real estate professional status.
• [ ] Depreciation schedules updated for every asset and disposition.
• [ ] Forms 1099-MISC or 1099-K received for rent collected through platforms or property managers, reconciled to your ledger.
• [ ] Property manager year-end statements, which often show rent and expenses on a different basis than your own books.
• [ ] Insurance and casualty claim records, including any reimbursements received.

Bring this file to your preparer, or to your own software session, in January rather than April. Early filing gives you time to resolve missing 1099s, catch omitted depreciation, and decide on elections that must be made on a timely filed return.

Illustration

Illustration: A married couple in the 24% bracket with MAGI of $120,000 owns two rentals. In December 2026 they review the checklist:

• They can use up to $15,000 of passive loss ($25,000 minus 50% of the $20,000 of MAGI over $100,000). Deductible traditional IRA contributions of $7,000 for each spouse, within the 2026 limit and if they qualify, would cut MAGI to $106,000 and raise the allowance to $22,000.
• They replace refrigerators and a range for $3,500 in mid-December; as 5-year property with 100% bonus, the full $3,500 is deductible in 2026.
• A planned $9,000 exterior repaint is moved up to December, deductible as a repair.
• They paid a plumber $2,400 during the year and, because their rentals are run as a trade or business, request a W-9 to file a 1099-NEC by February 1, 2027.

Total new 2026 deductions: $12,500, worth about $3,000 at 24%, if within the allowance. Simplified figures; IRA deductibility depends on workplace plan coverage.