The before-December-31 checklist for rental property investors

Most of what decides your rental tax bill is settled by December 31. The return gets filed in March or April, but by then the hours have been worked or not, the property was in service or wasn't, and the repair either got paid this year or slid into next.

This is the list I'd work through in November, roughly in order of how much it costs to miss.

Property in service

Confirm every new property was placed in service by December 31. Depreciation starts when the property is ready and available for rent, not when you closed and not when the first tenant moved in. A unit still mid-rehab on December 31 starts depreciating next year.
Write down the placed-in-service date with evidence. The listing date, the first showing, the date the certificate of occupancy came through. Your preparer will ask, and "sometime in the fall" isn't an answer.
Get the land and building split done for every purchase this year. Land doesn't depreciate. Use the county assessor's ratio or an appraisal, and keep whichever you used.
Map the closing statement. Some lines are basis, some are deductible this year, and some are neither. Where every line on your closing statement goes walks through each one.
Decide on cost segregation before you file, not after. For property acquired after January 19, 2025, 100% bonus depreciation is back, so a study on a 2026 purchase can move a large share of the basis into this year. A study ordered now can be in hand before the return is due.

Short-term rentals and hours

Finish your hour log for every STR, and keep it current. Material participation is judged on hours actually worked in the calendar year. December hours count. January hours don't count toward this year.
Check which test you're relying on. The common ones: more than 100 hours and more than anyone else (including your cleaner and co-host), or 500 hours on your own.
Count the other people's hours too. The 100-hour test fails if your cleaner logged 130 hours. Get the cleaner's and co-host's invoices or schedules before year end, while they're easy to ask for.
Confirm the average stay is 7 days or less. That's what keeps an STR out of the passive rental rules in the first place. One long winter booking can tip it.
Know what doesn't count. Reviewing financials and work invented to rack up hours don't count. STR material participation: what counts, what doesn't has the full list.

Repairs, improvements and spend timing

Total your repair and maintenance spend per building. If it's under the lesser of $10,000 or 2% of the building's unadjusted basis, the small taxpayer safe harbor may let you expense all of it. Go over by a dollar and you lose the whole election for that building.
Decide whether to pay pending repairs in December or January. On the cash method, a repair paid in December is a 2026 deduction. If you're close to the small taxpayer ceiling, waiting can be the better move.
Set your de minimis policy for 2027 before January 1. Items up to $2,500 per invoice or item can be expensed, but the accounting procedure has to be in place at the start of the year. The three safe harbors, explained covers all three.
Separate improvements now. A new roof, an addition or a full kitchen gets capitalized and depreciated. Tag those transactions while you still remember what each charge was for.

Passive losses and status

Estimate whether your rentals will show a loss. If they will, how much you can use depends on your income and your status.
Check the $25,000 allowance. For active participants it phases out between $100,000 and $150,000 of modified AGI. Above that, losses carry forward rather than vanish.
If you're counting on real estate professional status, check the log. You need more than 750 hours in real property trades or businesses, and more than half of all your working hours. A full-time W-2 job usually rules this out.
Ask about the aggregation election. Real estate professionals usually have to treat all their rentals as one activity to meet material participation. It's a one-line election people forget.

Contractors and 1099s

Collect a W-9 from every contractor you paid this year. It's far easier in December than when a filing deadline is coming up.
Flag who crossed the 1099 threshold. For payments made in 2026, the 1099-NEC and 1099-MISC threshold rose to $2,000. Forms go out by January 31, 2027.
Exclude card and payment-app payments. Payments by credit card or through a payment processor are reported by the processor, not by you.

Sales and exchanges

If you sold a property this year, pull its full basis history. Purchase price, closing costs, every capitalized improvement and the depreciation taken. You owe tax on the depreciation you were allowed to take, whether or not you took it.
If you're mid-1031, check the dates. You have 45 days from the sale to identify replacement property and 180 days to close, and neither is extended for the holidays.

The books themselves

Categorize every transaction through November now, and December in the first week of January. Uncategorized transactions are where deductions go missing.
Reconcile each bank and card account to its statement. If the books and the bank disagree, the books are wrong.
Tag every transaction to a property. Schedule E is per property. A portfolio-level total can't be split up in March.
Split each mortgage payment. Principal isn't deductible. Interest is, and so are the property tax and insurance paid out of escrow. Your Form 1098 will show the interest. Check it against your books.
Set aside security deposits. A deposit you hold isn't income. A deposit you keep for damage or unpaid rent is.
Make your fourth-quarter estimated payment. It's due January 15, 2027.

None of these take long on their own. What hurts is doing twelve months of them in one weekend in March, from memory. If you run through the list in November, the return mostly fills itself in.

This is general information, not tax advice. Thresholds, elections and dollar figures change, and the right treatment depends on your situation, so check with a CPA before you act on any of it.