However now that my closing date was officially around the corner the underwriter began doing their thing and came back with a past tax bill that needed to be paid before closing and that was it.

It's on the far NW side and has inventory in that price range, but consider that taxes are relatively high in Elgin VS most suburbs.   

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Then out of the portion they keep, they pay income tax, E&O insurance, health insurance, MLS dues, NAR dues, continuing ed, marketing, car insurance and maintenance, retirement fund, etc. then live off of what's left.

Well damn, clearly I need better guidance on tax planning... what are some ways to tap into those losses aside from selling?

I'm currently living down here but all my financials (assets, bank accounts, income, tax filings, etc) are in the US.

But you can still treat it as resulting in Ordinary Income even though it is reported on Schedule E, which lets you properly report in accordance with the tax results it seems you are shooting for under the tax return loophole.If your CPA is looking at switching it between schedules to get that tax result...it sounds like they don't understand the reporting position fully and/or they just don't know how to use their own software to address it.In summary, based on what you are describing for the situation, it should go on Schedule E, with what sounds like the resulting refund of $17k.

I might be wrong but I am assuming the houses are also appreciating just because of the overall housing market trend but I believe the university is also expanding, thus increasing property taxes.

Normally, anything at a bar and for real estate investors is a good networking venue (also drinks can be tax write-offs).

These include irregular but inevitable expenses, such as vacancy rate, repairs, maintenance, accounting, insurance, property taxes, and property management.