End-of-Year Tax Moves for Arizona Real Estate Investors (Before 2026)

End-of-Year Tax Moves for Arizona Real Estate Investors (Before 2026 Hits)

As 2025 wraps up and investors start positioning themselves for 2026, there’s one group that consistently wins: those who take December seriously.

Real estate offers powerful tax advantages — but only if you plan ahead. This guide breaks down smart, legal end-of-year moves Arizona investors are using now to reduce taxable income, boost long-term wealth, and enter 2026 strong.

Important disclaimer: I am not a CPA, tax attorney or financial advisor. This post is for general informational purposes only. Always consult a qualified tax professional before making tax-related decisions.

1. Run a Year-End Cost Segregation Analysis (Even if You’re Not Doing a Full Study Yet)

Many investors assume cost segregation only applies to large commercial properties — but that’s outdated thinking. Even a simple feasibility review in December can show:

• How much bonus depreciation you still qualify for under current rules

• Whether you should accelerate a planned 2026 study into 2025

• Whether a late-year purchase could generate paper losses

• Whether a planned BRRR refinance in early 2026 should be moved up

For short-term rental owners, small multifamily investors, and those planning a BRRRR refinance, this can be a game-changer.

2. Make Last-Minute Repairs Instead of Improvements

Repairs are typically fully deductible in the year completed, while improvements must be capitalized and depreciated. December is the ideal time to knock out:

• HVAC servicing

• Roof patching

• Smart-lock or security upgrades

• Safety updates (GFI outlets, smoke detectors, railings)

• Minor plumbing fixes

• Touch-up painting

These small repairs can lower your 2025 taxable income — and leave your properties rent-ready going into 2026.

3. Prepay Select Expenses (When It Makes Sense for Your Tax Bracket)

If you expect to be in a higher tax bracket this year than next, prepaying certain business expenses can reduce 2025 taxable income. Consider prepaying:

• Insurance premiums

• Property management fees

• Advertising and marketing

• HOA dues

• Professional fees (accounting, legal, etc.)

• Software or tech subscriptions

• Landscape or pool service contracts

Be sure to verify with your CPA — not all expenses qualify for prepayment deductions.

4. Harvest Losses in Your Portfolio to Offset Big Gains

If you sold an investment property or high-growth stock this year, you may have capital gains exposure. Legal strategies to offset those gains include:

• Selling underperforming land you no longer plan to hold

• Liquidating notes or partial interests in partnerships

• Disposing of bad STR furniture or equipment assets

This strategy — especially when paired with structured installment sales — can help balance your gains and losses before year-end.

5. Consider a December Closing to Accelerate Depreciation

If you’re planning a purchase early next year, closing before December 31 could allow you to depreciate the full year — even if you only own the property for a short time. Combined with bonus depreciation (when applicable), this can provide powerful first-year write-offs.

This strategy can be especially attractive for W-2 earners who qualify as real estate professionals or STR owners who materially participate.

6. Max Out Your Retirement Vehicles (Especially Self-Directed Options)

Using real estate to build long-term wealth? Pairing it with tax-advantaged retirement vehicles now can pay off. Self-directed IRAs/401(k)s allow you to invest in:

• Land

• Notes

• Partnerships

• Rentals

• Private lending

If you’re not using one yet, December is a great time to set one up before 2026 investing — especially if you’re looking at long-term rentals, land, or passive investments.

7. Evaluate Entity Structure & LLCs Before 2026

For liability protection, better bookkeeping, and efficient tax reporting — it’s worth reviewing your entity structure now. In Arizona, December is an ideal time to consider:

• Whether properties should be split into separate LLCs

• Whether an S-Corp election makes sense for 2026

• Whether a holding-company structure simplifies future growth

8. Re-Evaluate Depreciation Schedules

Use this time to ensure your 2025 paperwork is accurate:

• Confirm depreciation schedules are up to date

• Remove disposed assets from schedules

• Ensure any repairs/improvements are correctly classified

• Verify Section 179 or other expensing elections were properly applied

Many investors overpay taxes simply because depreciation schedules are outdated or incorrect.

9. Clean Up 2025 Bookkeeping to Avoid 2026 Headaches

A clean start to the new year can save time and money. Before year-end:

• Categorize all receipts

• Log mileage (if applicable)

• Ensure home-office or office-use deductions are properly documented

• Separate capital expenditures from repairs

• Record all partnership draws, distributions, or other transactions

Having clean books now means fewer audit risks and smoother tax prep next year.

Final Thoughts: December Is Where Smart Investors Win

If you invest in Arizona — whether Phoenix, Tucson, or any surrounding markets — combining astute acquisitions with smart tax planning sets you up for outsized long-term gains. A few strategic moves now can lead to:

• Lower taxable income

• Better cash flow

• Stronger access to capital in 2026

• A clearer roadmap for future deals

Remember: I’m not a tax professional. Always verify depreciation, entity structure, or major financial moves with your CPA.

DTD Realty — Do The Deal. Driven. Trusted. Dependable.

If you want a Arizona-specific deeper breakdown with real examples, I published a full guide here:  https://dtdrealty.com/arizona-real-estate-investing-guide/