re: Help me understand depreciation on a rental property

Bottom line is, unless your modified AGI is too high, you are allowed to deduct up to $25,000/year of rental property losses (passive loss rules).

Any losses you cannot deduct are deemed "suspended losses", which can be deducted against passive income in future years or deducted in full when you dispose of that rental property.

I believe the maximum modified AGI at this point is $150,000.