Look at line 26 of the SCH E.
It is not common for long term residential rental real estate to show a profit. It is more common to show a loss each and every year. When you add up the deductions of Mortgage interest, property taxes, property insurance and the depreciation you're required to take, those four items alone will usually be more than the total rental income received for the tax year. Add to that the other allowed expenses (repairs, maintenance, etc.) and you're practically guaranteed to show a loss every single year.
Now, while you can deduct a maximum of $25K from any other ordinary income "if" you meet the income thresholds, any excess is just carried over to the next year. But of course, you've got to have that "ordinary income" to deduct it from.
Keep in mind also, that all forms of depreciation (SDA, SEC179) are not a permanent deduction. All depreciation is recaptured and taxed in the tax year you sell or otherwise dispose of the property. Two things heppen then.
1) The recaptured depreciation is added to your AGI.
2) The increased AGI has the potential to bump you into the next higher tax bracket.
Now we all have our own way of thinking and doing things. I never take any type of accelerated depreciation on my rentals since it actually makes absolutely no difference to my tax liability.
Note also that if your income is over a certain threshold, then the additional $25K against other ordinary income is phased out/not allowed. So the amount would be carried over to the next year.
