When dealing with rental real estate is is "extremely" uncommon to show a profit *ON* *PAPER* when you file your taxes each year. This is especially true if there is a mortgage on the property. In fact, it's much more common for rental property to show ever increasing losses with each passing year, that just get carried forward to the next year. Those losses continue to increase and accumulate with each passing year. They never expire.
You don't actually get to 'realize" those losses until the year you sell or otherwise dispose of the property.
Generally, the mortgage interest, property taxes and the depreication you are required to take by law, will all by themselves exceed the amount of rental income received. Add to that your other deductible rental expenses such as insurance, repairs and maintained costs, and you're practically guaranteed your allowed rental deductions will exceed the rental income. Since rental income and expenses are all passive and passive expenses can only be deducted from passive income, that's why you have ever increasing losses that just get carried forward year to year.
But in the year you sell the property, all those carry forward losses are first deducted from any taxable gain realized on the sale. Then if you still have more losses to deduct they are deducted from your other "ordinary income".
Now depending on your AGI for the year, your deduction from ordinary income could be limited to $3000 for that tax year. But that's fine because you'll still be able to carry forward the unallowed losses and deduct each year until they're all used up.
