@Stephanie Irto that is what I was thinking as well and I looked at the guidelines with bothmy broker and CPA and we all agreed...but basically the depreciation is denoted on my K-1 as an "ordinary loss" because there isn't a specific line item for depreciation on the K-1.  

You'll pay ordinary taxes at your marginal rate, and you'll likely be on the hook for self-employment taxes as well.If you're looking to reduce your tax burden, you won't want to flip houses to do it.

Reno it for a flip, find a KILLER tenant (even if that means a lower rent price for the dream tenant) and sell it after a year and either 1031 it or just sell it outright and pay long term capital gains vs ordinary income rates. 

the way I would accomplish this is for the seller and the buyer settle with you being on the HUD -1 as an assignment fee.You would not benefit tax wise, your assignment fee would be taxable as ordinary income.   

Of course, any rental income you have left after that does get hit with Federal income tax, but not with the FICA / Medicare taxes the ordinary wages of our poor hardworking employee are subject to.Furthermore, as a member of the military you get BAH and BAS (housing and food allowances) and you do not get taxed on that money, and you still get to claim the standard deduction on your taxes.I hope those facts help you get into a more positive mindset about your rental.

@James MasottiAs ordinary income.

It was a 15 month flip, ordinary income.

@Tim Moore If you are flipping, you will have to pay ordinary income tax if the property isn't held for 1 year and 1 day or more.

Flip income isn't subject to capital gains, it's taxed at ordinary income rates.

., the losses produced by deprecaition on rental property) to offset ordinary income.