It depends, since your wife is an RE professional. Here's what I see in the "learn more" link.
What Material Participation Means for Real Estate Professionals
If you're a real estate professional you can deduct all of your losses from your rental properties if you can prove that you materially participate in their management. It's important to keep records for all your activities.
You are materially participating if:
- More than half of your personal services are provided for your real estate business, and
- You spend more than 750 hours each year on each property
This means that even if you are a real estate professional, but you're not materially participating in all of your properties, it's possible that all of your losses will not be fully deductible, or deductible only up to $25,000. That's because your involvement with your properties would be considered passive activity (just like a regular taxpayer who happens to own rental real estate).
About carryovers:
If you had passive activity losses from rental properties (regardless of whether you're a real estate professional), you can carry them over to the next year - just like losses from stock sales.
