When a married couple files separate, they both *automatically* disqualify for deductions they would otherwise get if they filed a joint return.
If the property is jointly owned (and that's clearly identified on prior year tax returns) then you both have to file SCH E each claiming 50% of all income/expenses. The $25K allowance from rental losses to other income is cut in half for each of you, and the thresholds to qualify for that is also cut in half. So more than likely it won't help. With the automatic disqualification for other deductions by filing separate returns, it will probably hurt more to file separate returns.
Understand that your carry over losses are not lost forever. If in a future year you qualify to deduct up to $25K from other income, then you can. Otherwise, carry forward losses are not realized until the tax year you sell or otherwise dispose of the property.
Typically, the TurboTax program will take care of the "up to $25K deducted from other ordinary income" for you automatically, *if* *you* *qualify*. If you indicated that you do "NOT" actively participate in the rental activity, then you do not qualify. Be aware there is a difference between active participation, and material participation.
Active participation.Active participation isn’t the same as material participation (defined later). Active participation is a less stringent standard than material participation. For example, you may be treated as actively participating if you make management decisions in a significant and bonafide sense. Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions.
So if you are not an active participant, the $25K deduction from other income may not be allowed regardless of your filing status.
