Key Tax Moves to Prepare for 2025 as a Real Estate Investor

Maximize Deductions for Property Expenses: A Must-Do Before Year-End

As a real estate investor, your properties are a goldmine of tax-saving opportunities. From mortgage interest to repairs and insurance premiums, there are a range of deductible expenses that can dramatically lower your taxable income. But many investors overlook certain expenses—whether it’s a small repair bill or a forgotten insurance payment. Now is the time to comb through your records and make sure every expense is accounted for. Don’t let this year’s costs go underreported—deductions like these can help you save thousands.

• Mortgage Interest: Interest paid on loans for purchasing or improving rental properties is fully deductible.

• Property Taxes: Any property taxes assessed on your rental properties can be deducted.

• Insurance Premiums: Premiums paid for property insurance, liability insurance, or other coverage related to the rental property are deductible.

• Repairs and Maintenance: Costs associated with repairing or maintaining your property, such as fixing plumbing, electrical issues, painting, or landscaping, are deductible.

• Utilities: If you pay for utilities (electricity, water, gas, trash removal) for your rental properties, these costs can be deducted.

• Property Management Fees: Fees paid to property management companies for managing the rental property are deductible.

• Advertising: The cost of advertising your rental property, including online listings, flyers, or newspaper ads, can be deducted.

• Cleaning and Janitorial Services: Expenses related to cleaning and preparing the property for new tenants, including services like carpet cleaning or pressure washing, are deductible.

• Travel Expenses: Travel costs for managing your rental properties, including mileage, airfare, lodging, and meals when traveling to a property for inspections, repairs, or management, can be deducted. Keep detailed records of business-related travel.

• Depreciation: The cost of the property (excluding land) can be depreciated over 27.5 years for residential rental properties, leading to annual deductions that reduce taxable income.

• Legal and Professional Fees: Fees paid to attorneys, accountants, or other professionals for services related to the rental property are deductible.

• Tenant Screening and Application Fees: Costs associated with background checks, credit reports, and rental applications are deductible.

• Home Office Deduction: If you use part of your home exclusively for managing rental properties, you may be eligible for a home office deduction.

• Office Supplies: Supplies such as paper, pens, postage, and other office-related items for managing your rental properties are deductible.

• Loan Origination Fees: Any fees associated with securing a loan to purchase or refinance rental property, such as loan origination or processing fees, can be deducted.

• Association Fees: If your rental property is part of a homeowners association (HOA), the association fees are deductible.

• Capital Improvements: While not immediately deductible, the cost of capital improvements—such as adding a new roof or installing a new HVAC system—can be depreciated over time.

• Security System and Monitoring Fees: Costs for security systems, cameras, and monitoring services for your rental properties are deductible.

• Property Maintenance Contracts: Fees paid for regular maintenance contracts, such as pest control or landscaping services, are deductible.

• Interest on Loans for Improvements: Interest paid on loans taken for capital improvements or property renovations is deductible.

Review Your Depreciation Schedule and Accelerate Deductions

Depreciation is one of the best tax benefits available to real estate investors, yet many investors miss out by not fully understanding how to maximize it. If you’ve made improvements or purchased new properties this year, you can claim depreciation on these assets. Take this opportunity to review your depreciation schedules and ensure all eligible assets are included. Additionally, consider a cost segregation study to accelerate depreciation on specific property components, giving you bigger deductions right now, instead of waiting years.

Use Tax Loss Harvesting to Offset Gains

Have you made profitable property sales or earned rental income this year? If so, you might want to consider tax loss harvesting to offset those gains. By strategically selling underperforming properties at a loss, you can reduce your taxable income for the year. Tax loss harvesting is an effective tool for minimizing capital gains tax, which can otherwise take a large chunk of your profits. If you’ve sold properties with gains, make sure you’re taking advantage of this strategy before the year ends.

Charitable Donations: A Smart Way to Save Taxes While Giving Back

Charitable contributions are not only a generous act—they can also reduce your tax burden. If you’re planning to donate property, cash, or other assets, ensure the donation happens before December 31st to maximize deductions on your 2024 return. When donating property, like real estate, you can deduct the fair market value, which could significantly reduce your taxable income. Consult your tax advisor to ensure your donations are structured for maximum tax benefit.

Leverage Energy Efficiency Tax Credits for Immediate Savings

Is your property energy-efficient? If you’ve installed solar panels, energy-efficient windows, or other sustainable upgrades, you may qualify for valuable tax credits. These credits directly reduce your tax liability, rather than just lowering taxable income. The end of the year is the perfect time to review all of your property improvements and make sure you’re not missing out on any green tax incentives.

Boost Retirement Savings and Reduce Taxes

One of the smartest ways to reduce taxable income while saving for the future is by contributing to a tax-advantaged retirement account, such as a Self-Directed IRA or SEP IRA. As a real estate investor, you can use these accounts to purchase real estate and enjoy tax-deferred growth. Before the year ends, make sure you’re contributing as much as possible to these accounts, reducing your tax liability and ensuring your retirement plans are on track.

Prepare for Estimated Tax Payments: Avoid the Surprise

If you’ve been raking in rental income or capital gains, there’s a good chance you owe estimated taxes. Don’t wait until April—take care of these payments before December 31st to avoid penalties. Failing to pay enough throughout the year can lead to penalties and interest. Check with your tax advisor to see if additional payments are necessary to avoid surprises at tax time.

Understand Passive Activity Loss Rules and Maximize Deductions

Rental properties typically generate passive income, and the IRS has strict rules about how passive losses can be used. In most cases, passive losses can only offset passive income. However, if you qualify as a real estate professional, you may be able to use these losses to offset other types of income. If you’re not yet a real estate professional, consider how your property losses can be applied to your overall tax strategy.