I only have umbrella insurance covering losses above $300,000.

Also, you have to remember that you have to materially participate(not actively) in the rentals to treat the losses as non passive.

Hi Experts,When a rental property is acquired on a holding company name but the daily operations run through different operating company...can one take the depreciation or bonus depreciation as ordinary income (loss) as opposed to rental income(loss) for the holding company?  

So cost seg will only increase carryforward losses, not reduce your taxes. 

You can also hire your kids.If you have a lot of rental losses: another reason might be to make it clear in your (or your wife) qualification as a real estate professional - although not dependent on a LLC as that is mostly a minimum 750 hours annually spent on real estate matters, if no other job - in which case you can deduct more then 25K in rental losses.So, it all depends on your and your wife situation - if you have a job or not, with or without retirement plans and medical insurance, etc. - and what is more important to you.There is another aspect to consider to set up as a different property management entity (LLC) from the holding entity - asset protection - you separate  public facing affairs and all the interactions with tenants, contractors, etc. through this operations LLC and act as property manager, not owner.

For most of the small investors, The threshold shouldn’t be an issue, but generally income limitation is an issue.Most of small investor shows tax loss or very minimal expense due to depreciation. 

Since we don't meet the tax law criteria for "Real Estate Professional" it seems that Turbo Tax disallows a significant amount of loss write off.

We need to talk with lawyer in more detail, as the one issue we are not sure on is if as far as the passive losses (which you usually have in the early years of rental real estate) should be 'split' or if they would be of more benefit to one of us than the other. 

., documenting all your losses, its likely you will win as you get Justice in Small Claims Court.  

Earned income is a direct result of your labor; usually W-2 or schedule C, both of which are subject to self-employment taxes (SS and medicare tax)-PORTFOLIO INCOME: interest, dividends, and gains and losses from sales of assets; Taxed at ordinary income rate or capital gains rate depending upon length of holding.