How to make the best of a challenging situation

[Larry Yinger]

Hello all! I'm purchasing a residence for me and my partner will be moving in. I will be the sole owner on the mortgage. For various reasons that aren't really up for debate, she prefers to rent her current 2 bed/1 bath in lieu of selling. The issue is that her residence will likely negative cash flow at about $200/month. We both understand that this isn't how to run an investment. There isn't much that can be done in terms of increasing revenue. It's a top end home in a small somewhat rural town. I guess my main question is... Is there any way to minimize the effect of negative cash flow through operating at a loss? I've done a little research and it seems she may qualify to deduct up to $25,000 in losses since her gross income is <$100k. Does the $100k gross income include the rental income? The question seems silly but just want to understand because with rent, it would be borderline. Any other ideas in regards to minimizing the net effect of negative cash?