Typically, rental income is reported on SCH E, which is passive. Whereas earned income not reported on a W-2 is self-employment income and gets reported on SCH C.
SCH E deductions have nothing to do with your standard or SCH A itemized deduction. SCH E expenses are deducted from your SCH E income. Whereas other deductions are a SCH A itemized deduction.
It is not common for long term residential rental property to actually show a taxable profit "on paper" at tax time anyway. When you add up the deductions of mortgage interest, property taxes and insurance along with the depreciation you're required to take, those four items alone will usually exceed the total rental income for the year. Include with that other rental deductions allowed, such as repairs, maintenance and other things, and you're practically guaranteed to show a loss on the SCH E every year.
Rental losses that exceed the rental income are just carried over to the next year. This includes deductions not allowed because of income thresholds if your overall income is to high. So the carry over losses will tend to increase with each passing year. Those losses can't be realized until the year you sell the property. Then those losses will help offset gains, as well as depreciation recapture sometimes too.
