She was the yin to my yang.

We do take advantage of deductions- maxing out both 401ks, HSAs in 2023 and itemizing deductions and will do so in 2024 - so we fall at the lower end of the 24% federal bracket (MAGI of $240-260k- so additional ordinary income is 24% income tax plus whatever Medicare/Social security we must pay on the $40kI know I can retain all the earnings in the LLCand 1031 exchange until we no longer have W-2 wages to reduce our taxes, but I plan on using the $40k for a personal home improvement - replace two HVAC systems and install a new wood deck and landscaping).

@Abhi Patel - You can deduct up to $25,000 in passive losses (Rentals) against your ordinary income (W-2) and other active business income if your modified adjusted gross income (MAGI) is $100,000 or less.This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out.

Its $25k if your MAGI <$100k. 

@Anthony GaydenThe phase out for allowing passive losses is from $100K to $150K Modified Adjusted Gross Income (MAGI).

@Sam Magi  The bulk of 77384 is North of The Woodlands and West of Interstate 45.Your numbers seem a little low to me. 

-----from irs site - If your MAGI (defined below) is $100,000 or less ($50,000 or lessif married filing separately), your loss is deductible up to themaximum special allowance referred to in the preceding paragraph.If your MAGI is more than $100,000 (more than $50,000 if marriedfiling separately), the special allowance is limited to 50% of thedifference between $150,000 ($75,000 if married filing separately)and your MAGI.

@Mohammed Abdullah Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less.

Quote from @Branden Yang: Why are you basing your investments on other people?

Consequently, if your modified adjusted gross income (MAGI) falls within this bracket, the amount you're eligible to contribute to a Roth IRA starts to diminish.2.