@Chase Cline Another idea that I came across in the book "Real Estate Loopholes" by Kennedy and Sutton, says "if you hold real estate in a state with weak or non-existent charging order remedies, you may want to consider using two LLC's for protection."

My understanding is you do not need to pass the “real estate professional test” for this.This seems like a big loophole for STR investors.

I began to track my hours and where those hours went.My understanding is that I can use the STR loophole to reduce my wife's taxable income.

If you didn't give them possession of the unit yet there are loopholes but have the attorney sign off on it.  

.- you or your spouse can qualify as RE professional and the limits the OP discussed do not apply- you can use the “STR loophole” (terrible name) to not have the limits the OP Discussed apply  - a derivative of the STR loophole that for lack of better name I will call the MTR loophole will let you provide amenities to not have the limit the OP discussed apply.I suspect there are many more.  

That w2 still does not limit you to things like the short term rental loophole for instance, which can help you offset those painful CA taxes.

I am bit afraid of possibly loopholes that can hurt my business

I would also ensure you can even qualify for the cost seg by making sure you either qualify for REPS(real estate professional status) or STR loophole (short term rental loophole)

Short-term rental loophole and REPS status are the main paths to follow! 

Can I still take advantage of STR loophole for 2025 tax?