I have high income, spouse doesn’t work, should we rent our home?

[Paul Jump]

I recently bought a home and some life changes make it a less than ideal residence. I absolutely love the home and the location is iconic. Even if it doesn’t appreciate in value, I would have a hard time letting it go and would rather rent it. My realtor tells me, that I can cover my mortgage and then some (probably break even after maintenance).

My spouse is a non working attorney and I have a high income W2 job which is as steady as it can be. 

I did a mock tax return on turbo tax, classifying my wife as a real estate professional and incredibly it knocked my marginal tax rate to 9% (from 28%). Is this really possible? Am I crazy to not rent out my home and buy another in a better suited location for my primary residence?

My biggest concern is if you calculate cash on cash return in this scenario, it’s only 0-1%/year. What am I missing in how I think about my tax benefits? Am I better off with my down payment money in an index fund for example?