Can this $10,000 be reduced from my taxable income to lower my taxes owed?
As stated by others in this thread, Depending on things such as your total income, once your rental expenses (including depreciation) gets your taxable rental income to zero, any expenses left over can be deducted from "other" ordinary income such as W-2 income, up to a maximum of $25,000. Most folks with say 1-3 rentals will be able to do this up to certain amounts not to exceed $25K. Any passive rental losses that can't be deducted just get carried over to the next year.
Now this $25K deduction against "other" income is a fairly recent allowance. So in the past it was most common to have carry over losses every year, with that carry over amount increasing each year. That could still happen to you, if you don't meet all the criteria to deduct your excess rental losses from that "other" ordinary income. That's actually fine.
In the year you sell the property, all disallowed losses that have been carried forward all those years are allowed in full in the year you sell the property. If for other reasons you can't deduct the full amount, (such as having more carry over loss that you do "other" income to deduct it from) then you'll still be able to carry it forward to the next year and deduct it then (possibly with limits). This would continue every year until all of that loss is used up.
