It is not common for residential rental real estate to actually show a taxable profit each year. Especially if there's a mortgage on the property. Due to your income being to high, your losses in excess of the rental income just flat out are not allowed. But you don't lose them. They just get carried forward to next year. All of your carry forward losses won't be and can't be realized until the tax year you actually sell the property. Then, and only then can those passive losses be used against other ordinary income. (In excess of the $25K that you may be allowed anyway.)