Passive Activity Loss Cap and Future Sale

[ingrownstudentloans]

I have a rental property in a state that I used to live in and have kept it for the past few years enjoying the tax deduction of the depreciation.  Unfortunately (or fortunately) my income was too high this year to take the passive deduction, so I have to let it accrue until I sell it.  I am having trouble understanding the impact of the accrued deduction, however, upon a sale.

Round numbers:

I bought the place for $210,000 in 2012
Today it is worth around $220,000
My depreciated basis is around $180,000 (I lived in half for a few years and only depreciated the 2nd unit until I moved out)
Each year I will accrue $5,000 in deferred passive losses.

Cash flow is roughly $4,000 a year after all expenses, not including reduction of mortgage balance which adds another $4,500.

My understanding is, if I sell today for $220,000, I would realize gains of $40,000 (appreciation plus recapture) on the sale.

What I can't seem to get a handle on is what happens if I sell for $220,000 in 3 years after accumulating $24,000 in deferred passive losses.  Do I get to apply that to the realized gains ($40,000 - $24,000 = $16,000)? Or can I only apply that against future passive income gains?  If the latter, where can I get some passive income gains to apply it against?

[ingrownstudentloans]

I Should also say - not looking for tax advice and I appreciate anyone's thoughts or ideas on this.  I'm just trying to get a handle on whether I should continue to hold the property or sell it.  I really enjoyed the tax benefit for the time I could use it, but I don't see my income going down drastically to get under the limit any time soon and it being an 1883 brownstone, I worry about the roof/sewer connection/boiler/everything which would wipe out 2 year's of positive cash if any one went.

[SeattleCPA]

Your suspended passive losses on that property will get "unlocked" when you dispose of property (probably)...

That means the suspended losses will probably shelter income in the year you sell the property... in effect, shelter gain...

BTW I'm intentionally being a little vague, because it's possible you selling the property isn't same as disposing of the activity. People with a bunch of rentals can make an election to, in effect, treat all of the rentals as one activity. When this happens, suspended losses don't get unlocked until you dispose of the last property.

Final comment: Remember too that you can always use suspended passive losses to shelter passive income and your gain is passive income. So you probably don't even need to worry about what I'm going into the weeds about.