For your specific situation all of that is true. However, there are exceptions. For the benefit of others reading this thread, I"ll give a few.
1. Putting a rental into an LLC is dumb and useless.
That actually needs further clarification. Putting a rental in a "single member" LLC makes no sense. But the CPA, EA or Lawyer that talked you in to it makes money on their "advice", even if it's bad advice. Now if you have a rental that is owned by two people (or more) that are not married to each other and can not file a joint return, then it makes sense to report the rental on a 1065 Partnership return. But there is no need or requirement to create a multi-member LLC for that purpose. The 1065 is used for both multi-member LLC's and Partnerships. Now you may be told that the multi-member LLC gives you more "protection" and it does. However, it's no better protection than a single-member LLC. A Limited Liability Company is still a Limited Liability Company weather it's a single member LLC with only one owner, or a multi-member LLC with two or more owners. But even on a 1065 return the rental is still reported on SCH E as a part of that 1065 return.
2. Find a fix for my wife's student loans so we can file jointly so we can reap the full benefits of owning rental.
That's easy. Pay off the loan. Understand that while it's most likely that your rental does not produce a single penny of "TAXABLE" income each year, it most likely does have a cash flow; meaning that you are putting a portion of rental income money into your pocket each month for you do to with as you please. Assuming I'm correct so far, the rental income has no impact on the student loan payments. (I'm also assuming the loan is up-to-date and you are in fact, making timely payments.) Now if you have other income (such as W-2 income) then that will increase the AGI which increases the payments of course. So what's the problem with that? It's not like it's going to double your payments. On average and of course depending on income, switching to joint will only increase your payments by 16%. Big deal. That just means the next year the 1098E will show more deductible interest. Now everall that probably won't help tax-wise since the loan interest is an itemized deduction on SCH A and those don't kick in until all itemized deductions exceed the standard deduction. But then again by filing joint, the standard deduction goes from $12K for single, to $24K for joint.
Another drawback to filing separate too, is that if one of you itemizes deductions, then you both have to itemize - even if the itemized deductions of one are ZERO! That can hurt big time.
3. Schedule C income/losses and schedule E income/losses are completely different and never affect each other... if it weren't for the special allowance in specific cases that do not apply to me currently
That is a true statement. Basically, SCH C income is earned income; meaning that you went out and actually "did something" on a recurring basis to earn that money. Therefore in addition to regular tax, that earned income is also subject to the additional 15.3% self-employment tax. Whereas SCH E income is passive income. All you do for SCH E income is just "sit there" and collect it on a regular basis. You don't actually "do" anything on a recurring basis to "earn" it. Therefore SCH E income is not subject to the additional 15.3% Self-employment tax.
4. TurboTax forums are awesome! Knowledgeable people actually willing to help the less-seasoned among us! Thank you everyone!
There is a lot of knowledge here. It's even true that there's a fair number of retired CPAs, EAs and even tax attorneys that participate here. Just keep in mind that this is a public forum and it's darn near impossible to confirm anyone is who they say the are. But overall it's a good place to learn a bit about taxes so long as you are aware that not all answers are always right. I myself have posted a few "boo-boo's" in my ten years here. But being a public forum someone else will see it and correct things. We all make mistakes here and there.
