For real estate investors, the end of the year isn’t just about closing deals—it’s about making smart moves that could save you thousands on your tax bill. If you don’t plan ahead, you might miss out on critical tax benefits that could otherwise be reinvested into your portfolio.
You can take control by implementing a few simple strategies before Dec. 31 to ensure you’re minimizing your 2024 tax liability and setting yourself up for a stronger financial future. Here’s a guide to the most effective tax-saving moves, especially for mid-income investors, that you can make before year-end.
1. Take Advantage of Accelerated Depreciation
Depreciation is one of the biggest tax advantages real estate investors have. If you own a rental property and haven’t done a cost segregation (cost seg) study, now is a good time to consider it. A cost seg study breaks down your property into components (like appliances or fixtures) that can be depreciated faster, leading to larger tax deductions in the early years of ownership.
Even if you don’t finish the cost seg study by Dec. 31, closing on the property before year-end still qualifies you for these benefits when you file your 2024 return.
Don’t own property yet? You can still benefit by investing in real estate deals that plan to do a cost seg study. If the deal closes by the end of the year, you can take advantage of the accelerated depreciation.
Take action
Talk to your CPA about starting a cost seg study or explore real estate equity deals that will close before the year ends.
2. Execute a 1031 Exchange
If you’re selling a property this year, a 1031 exchange lets you defer capital gains taxes by reinvesting the sale proceeds into another property. This can help you avoid a large tax bill and keep your money working for you in a new investment.
Let’s say you sell a rental property for a $100,000 gain. Without a 1031 exchange, you could be facing up to $20,000 in capital…