As 2024 comes to a close, real estate professionals and attorneys should take proactive steps now to maximize tax savings and position themselves for a strong financial future. 

This post provides some practical year-end tax strategies to consider before 2025 is here. For the best strategies for you and your business, be sure to consult with a tax professional.

Accelerate Deductions and Defer Income

• Purchase supplies, pay for marketing campaigns or make charitable donations before December 31 to lower your taxable income for the current year.
• If possible, delay closing a transaction until January, so the income is taxed in the following year.

Review Qualified Business Income (QBI) Deductions

• The QBI deduction can provide a 20% tax break for pass-through entities like LLCs, sole proprietorships and S-corporations. Ensure your taxable income stays below the thresholds to take full advantage of this deduction.
• Consult a tax professional to optimize strategies for this deduction while maintaining compliance.

Maximize Retirement Contributions

• Contribute to tax-advantaged retirement accounts such as a SEP IRA, Solo 401(k) or traditional IRA.
• Real estate agents and attorneys with self-employment income may qualify for higher contribution limits, offering significant tax-deferred growth opportunities.

Leverage Home Office Deductions

• If you operate your business from home, make sure to claim the home office deduction.
• Deduct expenses like a portion of your rent or mortgage, utilities and internet service. Use the simplified deduction method or calculate actual expenses to determine which provides the greater benefit.

Conduct a Year-End Expense Audit

• Review your profit and loss statements to ensure all business-related expenses are accounted for, such as:
  • Mileage and vehicle costs.
  • Continuing education or licensing fees.
  • Software and technology tools.
  • Client entertainment and meals.

Reassess Depreciation on Business Assets

• Real estate attorneys with office spaces and agents with vehicles or other equipment should evaluate depreciation schedules.
• Bonus depreciation or Section 179 deductions might be available for assets purchased this year.

Harvest Investment Losses

• If you own investment properties or other securities, consider selling underperforming assets to offset capital gains. This process, known as tax-loss harvesting, can reduce your taxable income.

Consider Entity Structuring for Tax Efficiency

• Review your business structure to ensure it aligns with your income level and goals.
• Forming an S-corporation or LLC might offer tax advantages, such as reducing self-employment taxes or qualifying for additional deductions.

Stay Updated on Tax Law Changes

• Real estate professionals should stay informed about updates to federal and state tax laws that could impact deductions, credits or filing requirements.
• Hiring a knowledgeable CPA with experience in real estate taxation is crucial to navigating complex regulations.

Plan for Estimated Taxes

• If you’ve had a strong year, you may owe more in estimated taxes. Avoid penalties by making an additional estimated tax payment before the January deadline.

Work with a Trusted Tax Advisor

• Navigating tax laws can be complex, especially for attorneys and real estate professionals. Collaborate with a tax advisor familiar with you and your industry to ensure compliance and take full advantage of available strategies.

Final Thoughts

A little tax planning now can save significant time and money when April rolls around. Whether you’re closing deals or advising clients, staying proactive about your financial health is just as important as growing your business. Collaborate with tax professionals to tailor these strategies to your unique situation and end the year on solid financial ground. And be sure to work with Landtrust and our best-in-class team of professionals for your upcoming closings.