Here is the flat answer, because it is the one thing that decides the year: closing in December does not give you a December deduction. Depreciation starts on the placed-in-service date, and for a rental that date is the day the property is ready and available to rent — not the day you sign at the title company. Close on December 18 with the unit rent-ready and advertised by December 31 and the deduction is a 2026 deduction. Close on December 18 with the furnace out and the listing not up until January 9, and the whole thing is a 2027 deduction instead.
That gap is usually worth tens of thousands of dollars of timing, and in late December it is often still inside the owner's control. So it is worth knowing exactly where the line sits.
What does “placed in service” actually mean for a rental?
Ready and available means a tenant who showed up that day could rent it. A certificate of occupancy where one is required. Utilities on. Systems working. Make-ready repairs finished. And the property actually offered — listed, advertised, handed to a leasing agent, or posted on a nightly platform.
What it does not require is a signed lease or a paying guest. A vacant unit genuinely on the market is placed in service; an empty unit nobody could rent yet is not. That standard, walked through in why your placed-in-service date is not your closing date, is the most common reason a December purchase misses the year it was bought in.
Does a December 20 closing still get 100% bonus depreciation?
Yes, if the property is placed in service by December 31 and it was acquired after January 19, 2025. Under the OBBBA rules, property acquired (contract signed) after that date qualifies for 100% bonus depreciation, and a purchase that goes under contract this fall clears that easily.
The useful part: bonus depreciation is not prorated for the part of the year you owned the property. A cost segregation study reclassifies a slice of your basis into 5-, 7-, and 15-year property — appliances, carpet and vinyl, cabinetry, dedicated electrical, landscaping, paving — and when that property is placed in service in 2026, the full 100% comes off in 2026 whether that happened in February or on the 29th of December.
What does get prorated is the 27.5-year building portion. Residential rental property uses the mid-month convention, so a property placed in service in December is treated as placed in service on December 15 and earns roughly half a month of depreciation for the whole year. On most residential deals that is a few hundred dollars. It is not the number that matters.
Does the mid-quarter convention wipe out a fourth-quarter purchase?
This is the worry people bring, and for most residential buyers it is smaller than it sounds. The mid-quarter convention applies to personal property — the 5-, 7-, and 15-year assets — and can push a fourth-quarter in-service date onto a much smaller first-year percentage. But when 100% bonus depreciation applies to that property, the entire cost comes off in the first year and there is nothing left for the convention to slow down.
It starts to matter when you elect out of bonus depreciation, when you hold property that does not qualify, or at the state level, because a number of states do not follow federal bonus and compute their own schedules. If you file in one of those states, read how state bonus depreciation conformity changes the math before assuming the federal answer is the answer.
A $610,000 December purchase, run out in dollars
Take a single-family rental bought for $610,000, closing December 12, 2026, with the unit cleaned, working, and listed on December 22. Allocate 20% of the purchase price to land and $488,000 is depreciable.
A study on a property like this commonly reclassifies around 22% of the depreciable basis into shorter-lived property — call it $107,360. Because the property was acquired and placed in service after January 19, 2025, 100% bonus depreciation applies and that $107,360 is deductible in 2026. The remaining $380,640 of building basis runs on the 27.5-year schedule, and with the mid-month convention a December in-service date yields about $579 for the year. First-year depreciation is roughly $107,939.
At a 32% marginal federal rate, that is about $34,540 of federal tax saved on a 2026 return — assuming the loss is usable against your income this year, which turns on material participation and the passive loss rules rather than on the calendar. Miss December 31 and the same $34,540 does not disappear, but it moves to your 2027 return, a full year later, and you will have made that decision by accident.
Your December 31 checklist
Close and take title. Finish make-ready work, so the unit could be occupied. Turn utilities on and confirm heat, water, and appliances function. Put the property on the market and keep proof — a dated listing screenshot, the MLS or platform activation date, the leasing agent's email. Then keep the closing statement, the certificate of occupancy if your jurisdiction issues one, and dated photos of the finished unit.
That evidence file is what makes a December date audit-ready. The position is fine; the documentation is what makes it easy to defend.
What if it will not be ready until January?
Then take January, honestly, and plan around it. Backdating a placed-in-service date is the wrong trade — it is the one fact in a study an examiner can check against a listing history, a utility bill, and a certificate of occupancy in about ten minutes.
A January date is a shift, not a loss. The study still gets done, the same reclassification still happens, and the deduction lands on the return you file the following spring — with eleven and a half months of building depreciation instead of half a month.
If you are weighing a fourth-quarter closing right now, the free instant estimate will size the deduction you are deciding about in a couple of minutes.