By the time your K-1 arrives, the tax year it describes has been closed for months. Nothing on it can be changed. It can only be reported.
That is worth sitting with as the fourth quarter begins. For investors, tax season tends to arrive twice. First comes the March and April wave, when K-1s land and returns come due. Then come the September and October deadlines for anyone who extended (which, with several K-1s in the mix, is often the realistic path). Both moments feel like the start of tax work. In practice, they are receipts. They record the decisions we made, or did not make, the year before.
That framing changes the question. What is the hidden cost of treating March as the planning window? You end up planning for a year that is already locked. The fourth quarter is the last stretch where a decision can still change the outcome instead of only describing it.
In today’s snippet, I will walk through the three-step framework I use every fourth quarter: Establish, Evaluate, Execute.
Step 1: Establish Where the Year Actually Stands
Close the books through the latest period available. If you are doing this in the fourth quarter, that is likely September. A year-end plan built on a mid-year estimate carries the estimate forward, along with its errors.
Sort income by type and project each to year end. Ordinary, portfolio, and passive income are taxed differently, and the mix will shape your strategy. On the passive side, ask a few questions. Which investments will issue K-1s, and how late did they arrive last year? Did any deal sell or refinance this year? Is a sale scheduled to close in December, or could it slide into January? That single date can move a gain from one tax year into another.
Confirm the documentation. If you issue 1099s, do you have W-9s on file for everyone you paid? Are business expenses recorded and supported? Certain business expenses may be deductible, but only the ones you can document.
Know what you have paid and what is still due. Compare taxes paid to date with your projected liability, and set aside the fourth-quarter estimated payment now. That payment is typically due in mid-January, which is easy to lose track of during the holidays.
Review charitable giving. Separate what you have given year to date from what you have planned or committed.
Schedule time with your tax advisor. In November, your advisor can still advise. In March, they can mostly report.
Step 2: Evaluate Whether the Structure Still Works
With the baseline in hand, the next question is whether your current structures still fit the year you actually had. Entities, account types, and the way investments are held were set up for a certain income picture. Sometimes the year outgrows them.
Then consider what the baseline calls for. These are questions to bring to your advisor, not answers to apply on your own. Are there losses worth harvesting against gains already realized? Does a Roth conversion make sense in a lower-income year, or would it push income into a bracket you would regret? Should charitable contributions be accelerated into this year or held for next? Are retirement contributions where they should be for the structures you have?
The timing questions matter just as much. Would it help to delay revenue or accelerate expenses, or does next year’s outlook argue for the reverse? And if you have a capital gain coming from a real estate sale, is there a strong deal you could invest in whose cost segregation and accelerated depreciation may help offset that gain?
That last question deserves its own paragraph, because it is where I see some of the most expensive mistakes. A large first-year paper loss looks attractive when a gain is on the horizon, and depending on your situation, those passive losses may help offset it. But the tax tail should never wag the investment decision. A weak deal with a large depreciation schedule is still a weak deal, and saving tax on a gain does little good if the capital behind it is lost.
So ask yourself two questions. Would I invest in this deal if it carried no tax benefit at all? Will the timing of the close actually pass losses through to me this year, or is that only how the opportunity is presented? If the answer to the first question is no, the second one does not matter.
Step 3: Execute Before the Window Closes
A plan that is not acted on by December 31 becomes next year’s lesson. Make the Roth conversion, fund the contributions, complete the harvesting, and time revenue and expenses as decided.
Allow for processing time. Conversions, transfers of appreciated assets, and contributions to donor-advised funds can take days or weeks to settle, and custodians get busy in December. In practice, “before year end” means early to mid-December.
Then document what you did and why, and calendar what comes next: the January estimated payment, the expected K-1 dates, and the extension deadlines if you will need them. If an extension is likely, treat it as the plan rather than a surprise. Remember that an extension moves the filing date, not the payment date.
Closing Thoughts
The EEE strategy is simple by design. Establish tells you where you stand. Evaluate tells you what that position calls for. Execute turns the decision into an outcome while it can still change something.
Next spring, the K-1s will arrive and the returns will be filed. The numbers on them are being written now. If your return were filed today, which line would surprise you, and is there still time to change it?
Vessi Kapoulian
Peeling back the layers of passive real estate investing, so you protect the downside and invest with clarity and confidence.
Disclaimer: The information presented does not constitute legal, accounting, tax, or individually tailored investment advice. Past results do not represent or guarantee future performance.
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P.P.S. For a deeper walk through passive apartment investing, the second edition of The Busy Professional’s Guide to Passive Apartment Investing is now available in paperback, audio, and digital, with expanded diligence chapters and updated material.