Disclaimer
These insights are for educational purposes only. You’re welcome to share them as talking points with your clients, but every taxpayer’s situation is unique — always remind clients to confirm what applies with a qualified tax professional (hey, that’s where I come in).
💬 Why This Topic Matters
Most agents stop helping when the deal closes. The ones clients remember — and refer — are those who can say:
“By the way, here are a few tax moves to check on before the end of the year.”
These 2025-ready tips are practical, IRS-approved, and simple to bring up in conversation. You don’t need to be a CPA to sound informed — know the basics and guide clients to verify with their tax pro.
Below you’ll find the most impactful year-end tax strategies for the 2025 filing season, clearly marked for whether they help most homeowners or primarily higher-income clients who itemize.
1. 🏠 Home Sale Exclusion — “The Tax-Free Profit Rule (and What About Forgiven Mortgage Debt?)”
What it is: When a client sells their primary residence, up to $250,000 (single) or $500,000 (married filing jointly) of gain can be excluded from taxes if they’ve lived there for at least 2 of the last 5 years.
Who benefits: ✅ Almost everyone — this applies even if the taxpayer takes the standard deduction. It’s one of the most powerful homeowner benefits in the tax code.
Realtor tip:
“If you’ve owned and lived in your home at least two of the last five years, you might not owe tax on hundreds of thousands in profit when you sell.”
Perfect reminder for sellers sitting on high equity or planning a 2025 move.
⚠️ What About Short Sales, Loan Forgiveness, or Foreclosures?
When a mortgage lender forgives part of a homeowner’s debt — whether through a short sale, loan modification, or foreclosure — the IRS can treat that forgiven amount as “cancellation of debt income” (CODI).
Ordinarily, that means it would appear as taxable income on the homeowner’s return. But there’s an essential temporary exclusion still in effect:
The Qualified Principal Residence Indebtedness (QPRI) exclusion allows taxpayers to exclude forgiven mortgage debt on their primary home from income if the discharge occurs before January 1, 2026.
This means that for 2025 only, homeowners who have a portion of their mortgage forgiven on their primary residence can still avoid having that forgiven balance treated as taxable income — provided they meet all IRS requirements.
After 2025, unless Congress renews it, that exclusion expires, and any forgiven mortgage balance could once again become taxable.
Realtor talking point:
“If a client goes through a short sale or has mortgage debt forgiven, that amount can be taxable — but under current IRS rules, they may qualify to exclude it from income if it happens before 2026. It’s crucial they talk to a tax professional before signing final paperwork as other deductions/calculations may have to be used or required to be taken.”
2. ☀️ Energy Efficiency & Clean Energy Credits
What it is: Two key credits remain strong for 2025:
Energy Efficient Home Improvement Credit: 30% of qualifying upgrades (insulation, windows, doors, HVAC) up to $1,200 per year.
Residential Clean Energy Credit: 30% of the cost for solar panels, battery storage, or geothermal systems.
Who benefits: ✅ All taxpayers — credits reduce taxes dollar-for-dollar, regardless of standard or itemized deduction.
Realtor tip:
“That new HVAC or solar install could earn you a 30% tax credit. That’s a direct reduction in what you owe, not just a write-off.”
3. 🏡 Mortgage Interest Deduction
What it is: Interest on mortgages up to $750,000 (for loans originated after Dec 15, 2017) can be deducted if the taxpayer itemizes deductions.
Who benefits: 💼 Primarily higher-income homeowners with larger mortgages or high state taxes.
Realtor tip:
“If your mortgage and property taxes are large enough, ask your CPA whether itemizing might save you more than the standard deduction.”
4. 🏢 Depreciation for Investment Properties
What it is:
Depreciation lets rental property owners recover the cost of buying, building, or improving their properties over time. The IRS treats a property as wearing out or losing value each year, even if it’s actually appreciating.
That means owners can deduct a portion of the property’s cost every year — a “non-cash” deduction that directly lowers taxable income.
Who qualifies as an investor:
✅ Individual landlords who personally own a house, condo, duplex, or ADU they rent out.
✅ Accidental landlords who moved and kept their old home as a rental.
✅ Short-term rental hosts who rent a second home or part of their primary residence.
✅ LLCs or partnerships holding property strictly for rental or investment.
The key is intent: if it’s rented or available for rent to earn income, the owner qualifies.
How it works:
Residential rental property is depreciated over 27.5 years; commercial property over 39 years.
Only the building (and certain improvements) depreciates — land does not.
Improvements that add value or extend useful life — such as new roofs, kitchens, HVAC systems, or flooring — are depreciated, while routine repairs (fixing a leak, painting) are expensed immediately.
The deduction starts when the property is placed in service (ready to rent), not when it’s purchased.
Example:
A client buys a rental for $400,000, with $80,000 allocated to land and $320,000 to the structure.
$320,000 ÷ 27.5 years = about $11,636 per year in depreciation they can deduct — even if the property cash-flows positively.
Why it matters:
Depreciation is often what turns a small profit into a “paper loss,” reducing or even eliminating taxable income from rentals.
Investors who actively participate can deduct up to $25,000 of those losses against other income if their AGI is under $100 K (phasing out by $150 K).
High-income investors can carry forward unused losses to future years or offset other passive income.
Watch out for recapture:
When the property is sold, the IRS “recaptures” the depreciation — meaning the total deducted reduces the property’s basis and can create taxable gain at a maximum 25 % recapture rate.
Smart investors plan ahead with cost-segregation studies or 1031 exchanges to defer that tax.
Realtor tip:
“Even one rental can unlock thousands in paper deductions. Encourage your investor clients to track improvement costs, keep depreciation schedules current, and review options before selling — that’s how you help them keep more equity long-term.”
5. 🔁 1031 Exchange — Deferring Capital Gains
In plain English:
A 1031 exchange allows an investor to sell one property without paying taxes on the profit immediately, as long as they use the money to purchase another investment property.
Instead of giving 20–30 % of their gain to the IRS, they roll that equity straight into their next deal.
💡 The Simple Concept
Think of it like a trade-up program for investors.
They sell one property, quickly buy another, and tell the IRS,
“Don’t tax me yet — I’m reinvesting in real estate.”
Taxes are deferred, not erased — but they can keep deferring again and again, which helps them grow wealth faster.
👥 Who Can Use It
Any client who owns property for rental, investment, or business can do a 1031 — even if it’s just one rental.
It does not apply to:
Their main home
A vacation home that they use personally most of the time
🏠 “Like-Kind” Means Easier Than It Sounds
“Like-kind” means both properties are real estate in the U.S. used for investment.
So they can trade:
A single-family rental → a duplex
Vacant land → a small apartment building
A warehouse → another commercial unit
They don’t have to be the same type — just both held for investment.
⏰ The Two Big Deadlines
1. 45 days to identify the new property (in writing).
2. 180 days to close on that new property.
If either deadline is missed, the whole exchange is disqualified, and taxes come due.
💰 Key Rule — Don’t Touch the Money
The seller can’t hold or deposit the sale proceeds.
They must go through a Qualified Intermediary (QI) — a neutral third party that handles the funds between closings.
📊 Quick Example
Your client sells a rental for $600 K and has $200 K in gain.
If they buy another qualifying property within the rules, that $200 K is not taxed now.
It simply transfers into the new property, keeping all their equity working.
📈 Why It Matters
1031 exchanges help investors grow their portfolios faster because they allow reinvestment of pre-tax dollars.
When done repeatedly, it can compound wealth for decades.
If the investor later passes the property to heirs, they often get a step-up in basis, wiping out those deferred taxes completely.
🧰 Realtor Tip
“If your client owns or plans to sell a rental, ask early if they’ve heard of a 1031 exchange.
They’ll need to set up the Qualified Intermediary before closing — not after.
Knowing this rule can literally save them tens of thousands in taxes and make you the agent who saved the deal.”
🧭 Bonus Tip for Agents
Add “1031 exchange potential” to your listing notes whenever you meet an investor-type client.
It shows you understand their financial goals and keeps you positioned as the go-to Realtor for serious investors.
6. 💸 Property Tax & SALT Deduction — What’s New for 2025
SALT stands for State and Local Taxes — mainly the property taxes homeowners pay, plus either their state income tax or state sales tax.
What it is (old rule):
State and local taxes (SALT) — like property taxes, state income, or local sales taxes — were deductible only if taxpayers itemized deductions, and capped federally at $10,000 total (for 2018–2024).
Big change in 2025:
Under the One Big Beautiful Bill Act (OBBBA), beginning with the 2025 tax year, that $10,000 limit is temporarily raised to $40,000 (for most filers) through 2029.
The $40,000 cap will increase by ~1% per year in 2026–2029.
However, for taxpayers with modified adjusted gross income (MAGI) over $500,000, the allowed SALT deduction is phased down — but not below the original $10,000 floor.
This increase is temporary — starting in 2030, the cap reverts to $10,000 (unless Congress acts).
What “phase-down” means (high earners):
If a client’s MAGI exceeds $500,000, their SALT benefit is reduced by 30% of the excess amount over $500,000 (but never below $10,000).
Who benefits under new rule:
✅ Homeowners in high-tax states who previously hit that $10,000 SALT ceiling.
✅ Those with moderate-middle incomes in states where state + property taxes exceed $40,000.
⚠️ High-income clients (above the MAGI threshold) may see limited benefit due to phase-down.
🚫 W-2 clients in lower-tax states (whose SALT payments are < $10K) may see little change.
State workarounds (PTE / pass-through entity):
Many states already offered PTE / “pass-through entity tax” options. Under those, a business (LLC, S-Corp) pays state tax at entity level, and owners deduct it on the business return, avoiding the SALT cap.
Under OBBBA’s final version, these state-level SALT workaround programs continue — the law doesn’t block or limit them.
Realtor tip (say this to your clients):
“For 2025, the federal limit on SALT deductions is up to $40,000 — but that benefit phases down if your income is over $500,000. If your state offers a pass-through entity tax option for businesses, that may still help bypass caps. Be sure to check with your tax pro before year-end.”
Why this matters for Realtors:
Many homeowners in high-tax states felt handcuffed by the old $10,000 cap — now you can mention they may finally itemize more.
But because the benefit is income-sensitive and temporary, you should always add the disclaimer that clients confirm eligibility with their tax advisor.
Remember: this is one of those topics where merely mentioning it as a possibility boosts your value — you don’t need to get into phase-down math.
7. 💰 Retirement & HSA Contributions — The Easy Win Most Clients Forget
What it is:
Retirement accounts and Health Savings Accounts (HSAs) let W-2 clients and self-employed buyers reduce their taxable income while building long-term savings. You don’t have to explain the details — remind clients to check that they’ve contributed as much as they can before year-end.
2025 contribution limits:
IRAs (Traditional or Roth): up to $7,000 per person ($8,000 if age 50 or older).
401(k), 403(b), or TSP plans: up to $23,000 per person, plus an extra $7,500 catch-up if age 50 or older.
HSAs: $4,300 for self-only coverage or $8,600 for family coverage, plus a $1,000 catch-up if age 55 or older.
(The IRS may make minor final adjustments before filing season.)
Who benefits:
Nearly every W-2 homeowner or buyer who qualifies for these accounts, especially middle-income families, is looking to trim their taxable income.
Contributions reduce taxes whether or not the client itemizes deductions.
Realtor tip:
“Remind clients to review their 401(k), IRA, or HSA contributions before December 31. It’s an easy way to save on taxes while planning for the future.”
Why it matters:
Mentioning simple tax-savings reminders shows clients you care about more than just closing a sale — you’re helping them think like long-term homeowners and investors.
8. 🧾 Keep Those Closing & Renovation Records
What it is: Home improvements increase cost basis, which lowers taxable gain when the home is sold. Many sellers lose deductions because they didn’t keep receipts.
Who benefits: ✅ All homeowners and investors.
Realtor tip:
“Keep every closing statement, contractor invoice, and big repair receipt. It could save you thousands when you sell later.”
9. 🚗 Mileage & Work-Related Travel (for Agents Themselves!)
What it is: For Realtors who are self-employed, the 2025 standard mileage rate is projected near 67¢/mile (final IRS rate will confirm). Keep a clean log — it’s one of the most audited deductions.
Who benefits: ✅ Every self-employed agent.
Realtor tip:
“Every showing, client meeting, and closing drive counts. Use an app to track mileage — small habits save big taxes.”
💼 How Realtors Can Use This Guide
Use these as conversation starters at open houses, closings, or year-end client check-ins.
Always follow with: “Of course, confirm this with your tax professional — but it’s worth asking about.”
This builds credibility and trust, keeping you top of mind when they (or their friends) need a real estate + tax-savvy agent.
✳️ Closing
If you’d like a printable 2025 Realtor Tax Tip Sheet to share with your clients or team, hit reply and a message, and I’ll send you the branded version from Super Dad Tax / Commission Keeper — ready to make you look like the pro who knows how to keep more commissions and more clients.