Before December 31: the year-end checklist for flippers and landlords
A rental ready on December 30 starts depreciating this year. One ready on January 2 starts next year. Five year-end dates that decide which year your flip profits, repairs, and estimated tax land in.
For most individual investors, the tax year ends on December 31. Whatever is finished, paid, and documented by then counts for this year. Whatever slips into January usually waits a full year, or lands in a different bucket. For flippers and landlords, a few of those dates can move real money, and they are much easier to manage in November than in April.
This is a calendar checklist, not a tax plan. How a flip gets taxed is covered in what actually lands after tax on a flip, which walks one deal through three treatments. How depreciation and the rest of a rental year work is covered in what actually lands after tax on a rental year. This post is about timing: what to do before the year closes, and what is due right after.
Every figure and date below comes from the Internal Revenue Service (IRS) pages linked in the references. Rules change, so check the current page and talk to your tax professional before you act.
1. Know when your rental is “placed in service”
Depreciation on a rental starts when the property is placed in service. The IRS defines that as the date it is ready and available for rent, not the date a tenant moves in.[1] If a rehab wraps up and the unit is listed and ready in December, it can count as placed in service this year even if the first lease starts in February. The same rule applies to an appliance: a unit delivered in December but not installed until January is placed in service in January.[1]
What to do before December 31:
Write down the date each rental, or each major item in it, became ready and available for rent.
Keep proof: the final inspection, the listing date, photos of the finished unit.
If a unit is close, know which side of the line it will land on. The rental-year tax post explains what depreciation does once it starts.
2. Sort repairs from improvements, and decide on the de minimis election
Year-end is when the pile of rehab and maintenance receipts gets sorted. Some costs are repairs you can deduct. Others are improvements you capitalize and recover over time. The IRS tangible property regulations set the test, and they include a few safe harbors that simplify it.[2]
The one most small investors use is the de minimis safe harbor. If you elect it, you can deduct amounts paid for tangible property up to $2,500 per invoice or item if you do not have an applicable financial statement (AFS), such as audited financials. With an AFS the limit is $5,000.[2] Most individual investors do not have an AFS, so $2,500 is the number that usually applies.
Three details matter:
It is an annual election. You make it with a statement attached to your timely filed original return, including extensions, for the year the costs were paid.[2]
It is all or nothing for the year. Once elected, it applies to every expense that qualifies that year.[2]
The invoice is the unit. Ask vendors for itemized invoices so each item is clear.
Here is a small example, using assumed numbers.[3] A landlord replaces a water heater for $1,800 on one invoice. With the election in place and under the $2,500 limit, that cost can be deducted this year instead of depreciated. Whether that is the better choice for you is a question for your tax professional, but the receipt needs to be sorted either way.
For flippers, rehab costs on a property held for sale are usually part of the property’s cost rather than a separate deduction. The dealer and investor question that decides this is covered in the flip tax post linked above, so it is not repeated here.
3. Match the closing date to the tax year
A flip that closes on December 30 and one that closes on January 3 can be almost the same deal, but the profit falls into different tax years. Neither date is better on its own. What matters is that you know which year the gain lands in before you agree to the closing date, so the tax money is set aside for the right year.
List every sale scheduled to close between now and early January.
For each one, note which tax year the closing date falls in.
Set aside the tax for each closing in that year’s column, using the approach in the flip tax post.
In ProfitGuard, for example, the closing date on each deal is what sorts the expected profit into a tax year, which makes this list quick to build.
4. Plan the fourth-quarter estimated payment
Flip profits and rental income usually have no tax withheld, so many investors pay estimated tax. For the 2026 tax year, the IRS due dates are:[4]
Payment | Due date |
|---|---|
1st | April 15, 2026 |
2nd | June 15, 2026 |
3rd | September 15, 2026 |
4th | January 15, 2027 |
You can skip the January 15 payment if you file your 2026 return by February 1, 2027 and pay the whole balance with it.[4]
When do you need to pay at all? Generally, you need to pay estimated tax for 2026 if both are true:[4]
You expect to owe at least $1,000 after withholding and refundable credits.
Your withholding and credits will be less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax.
If your 2025 adjusted gross income (AGI) was more than $150,000 ($75,000 if married filing separately for 2026), the prior-year figure is 110% instead of 100%.[4]
Flip income is lumpy. If most of your profit came from a sale late in the year, equal quarterly payments may not fit how you actually earned it. The IRS annualized income installment method lets your payments follow when the income arrived. You use Form 2210 with Schedule AI to show it.[4] Ask your tax professional whether it helps in your case.
5. Pull the records together while they are fresh
✓ Closing statements for every purchase and sale this year.
✓ Itemized invoices for every rehab and repair, sorted into repairs and improvements.
✓ Placed-in-service dates and proof for each rental and each major item.
✓ Estimated payments made this year, with dates and amounts.
✓ A note on whether you plan to make the de minimis election this year.
That list is also what your tax professional will ask for first. The checklist at the end of the rental-year tax post covers what to bring for the rental side.
Close the loop
December 31 is a cutoff, not a deadline you can push. A rental that is ready by then, a receipt that is sorted by then, and a closing date chosen on purpose all show up in this year’s numbers. Then January 15 brings the last estimated payment for the year. Walk the five steps in November, and the year closes the way you planned.
Next up: What actually lands after tax on a $60k flip — the same deal, three tax treatments, one take-home number.