How are you handling 2026 taxes with year-end buys? Curious what others are doing

Question

November question for the buy and hold guys —

I’m in Delray Beach, 33446 - Monarch Lakes townhouses mainly. I have one that can close mid-Nov - $242k + about $60k rehab, ARV around $420k, rent $2100 low end comps. Rehab done in Jan.

My CPA says if I close in Nov and place in service before Dec 31 I can start depreciation this year, even if tenant goes in Jan - is that how you guys do it? Or do you count placed in service as when rent starts?

Also - cost seg - do you do it year 1 on a $60k rehab or wait until after DSCR refi at $420k appraised? I’m at 70% LTV 30-year DSCR, and my ROE math gets messed up if I accelerate too much year 1 vs after refi pulling $126k out.

Last thing - I’m tracking 200 out-of-state owners in one zip - 20+ year owners, Michigan/Ohio/New York - if I close another one in Dec vs Jan, how do you plan taxes around that?

What’s your cutoff - do you rush to close before year-end for tax reasons or wait to keep next year clean?

Just trying to see how others handle Nov/Dec closings vs Jan.

Ashish Acharya · Answer

Muyees, this is exactly the kind of year-end planning question investors should be asking before closing rather than after.

One distinction I'd look at is the placed-in-service date. Closing in November doesn't necessarily mean you start depreciating the property in November. For a rental, you generally want to determine when it's actually ready and available for its intended rental use.

I'd also model the cost seg and rehab timing separately. The question isn't just how much depreciation you can generate, but when the property and improvements are placed in service and how much of the resulting tax benefit you can actually use.

For the Nov vs. Jan decision, I'd compare the after-tax outcome rather than rushing to close solely for a deduction. If the deal makes sense on its own, then the year-end tax timing can be another factor.

And with the number of out-of-state owners you're working with, I'd be curious how many of them are asking you similar year-end tax questions. That's probably a bigger opportunity than just solving it for one property.

Aaron Zimmerman · Answer

Good questions.

1. Your cpa is absolutely correct that you can start depreciating so long as the property is rent ready and advertised for rent.

2. For cost seg, I’d see how much in losses you can accelerate and if that’s beneficial/you could use the losses. You don’t necessarily need to wait on a refi.

3. I would have a little more sense of urgency if you’re trying to accelerate losses but I also wouldn’t cut corners on the rehab just for tax benefits. Better to do things the right way.

Muyees Ayilara · Answer

Aaron - thank you, that clears it up. Cost seg is on the $242k purchase plus $60k rehab, not on the $420k ARV. I was mixing up refi value with basis. And if it falls into 2027, there is no rush. I send a lot of 33446 DSCR deals to CPAs, so I will keep you in mind.

Scarlett Hayes · Answer

I’d be careful about rushing a closing just for the tax benefits. My understanding is that depreciation generally starts when the property is ready and available for rent, not necessarily when the first tenant moves in. With the rehab and DSCR refi involved, I’d also have the CPA model both cost-seg scenarios before deciding. I’d rather make the right investment move than force a December closing just to get a deduction.

As a real estate marketing and referral partner, I also focus on connecting property owners, investors and prospective renters with suitable rental opportunities. I’m always looking to build good relationships and help create valuable connections in the real estate market. Interested to hear what others are doing as well.

Anthony Smith · Answer

From the rehab side of the table, placed-in-service follows the work, not the closing date. If the scope finishes in January, a December closing mostly buys you a month of taxes, insurance, and utilities on a house that isn't earning yet — the depreciation clock starts when the house is rent-ready, and no CPA can move that ahead of the rehab. The mistake I see is the reverse of yours: investors compressing a rehab to beat the calendar, and a rushed scope costs more in callbacks and change orders than the deduction was worth. My rule is the deal has to stand on its own numbers first — price and rehab against a verified ARV — and then tax timing is a tiebreaker between two closings that both work, never the reason to force one that doesn't. On the cost seg, I'd model it after the refi for the reason you named: the basis story stays clean and you know what you actually pulled out.

Muyees Ayilara · Answer

Ashish — thank you, this is exactly why I tagged this question for year end.

You are right on placed in service. My CPA said Nov close, but what you are saying makes more sense — it is not placed in service until it is actually ready and available for rent, not just when I close. For my Monarch Lakes deal, rehab finishes in Jan, so I should not be counting Nov depreciation.

And the cost seg timing point is huge. I was going to do cost seg on the $60k rehab in year 1, but if I refi at $420k appraised after DSCR, doing it after refi makes the math cleaner. I do not want to accelerate too much in year 1 and then pull $126k out on refi and mess up my ROE.

On your last question — yes, a lot of them are asking. I am tracking 200 out of state owners in one zip, 20+ year owners from Michigan, Ohio, New York. At least half are asking me the same Nov vs Jan question right now. That is a bigger conversation than just my one property.

Appreciate you breaking this down. Can I send you the Monarch Lakes numbers so you can model Nov vs Jan after tax for me? I want to show my buyers the real difference.

Rachel Mazzanti · Answer

Don't rush a December close for the deduction alone, but don't leave the paperwork vague either. The thing that matters most for the books is the placed-in-service date, and that's generally when the place is ready and available for rent, not when the first tenant moves in.

So document ready-and-available like you mean it: the rent-ready walkthrough, dated photos, utilities on, listing live. If the rehab runs into January, keep those costs in their own bucket by category, because they land in a different year and a different basis schedule than the purchase itself.

On the cost seg question, that's a CPA modeling call, year one versus after the refi, and it depends on your income picture. What my company hands the CPA is a clean asset list per property so that decision is actually modelable: purchase price split land versus building, rehab broken out by item, dates nailed down. A rushed close with messy books buys you a deduction and a headache in the same month.

Muyees Ayilara · Answer

Anthony, thank you! I agree, the deal has to stand on its own numbers first. Tax timing is a tiebreaker, not a reason to force a closing. I would rather close in January clean than rush December and pay for it in callbacks and change orders.

Muyees Ayilara · Answer

Rachel - thank you, this is helpful. I will document ready and available properly with the walkthrough, dated photos, listing, and utilities on. I will also keep the January rehab costs in their own bucket by category so my CPA gets a clean list.

Aaron Zimmerman · Answer

@Muyees Ayilara thank you! And happy to help!

How are you handling 2026 taxes with year-end buys? Curious what others are doing

How are you handling 2026 taxes with year-end buys? Curious what others are doing

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