REAL ESTATE PROFESSIONALS  report their rental income and expenses  from rental activity on  IRS Schedule E like any investment property owner. 

As a Real Estate Professional, as defined by the IRS,  you may be deduct expenses over the standard limit of $25,000. 
THERE ARE SPECIFIC RULES TO QUALIFY. 
Following is a brief summary of these rules. 

CONSULT YOUR TAX ADVISOR TO SEE IF YOU QUALIFY AS A REAL ESTATE PROFESSIONAL FOR IRS PURPOSES

Full-time real estate professionals may be able to deduct 100% of their rental property tax losses from their income. That's not true for people who spend less than full time as real estate professionals or rental property owners. Details are spelled out in the Internal Revenue Code 469(c)(7). 

If you are a real estate agent or broker, a landlord, a professional property manager, a developer or are in the construction business, then the IRS considers you to be a Real Estate Professional. SUBJECT TO certain rules.

It is especially important for the Real Estate Professional who materially participates in the operations of rental real estate to be aware that ever since 1994 they are no longer subject to the Passive Loss Rules.

1. More than half of the taxpayer's personal services in all businesses must be in real property businesses. A real property business is real property development, construction, acquisition, conversion, rental, management, leasing, or brokerage

2. The taxpayer must spend more than 750 hours a year in real property trades or businesses.

NOTE: For time to be counted in either of the above two tests, the taxpayer must materially participate in the activity.

3. The taxpayer must materially participate in each rental real estate activity unless he or she has filed an election to group all rental real estate activities as one (for purposes of materially participating).

It may be a good idea to get a Real Estate License.

THE TAXPAYER SHOULD ALSO BE KEEP GOOD RECORDS OF THEIR INVOLVEMENT IN THE BUSINESS.