Jon Schaub may have some valid advice, but there seem to be several critical defects with your interpretation of it.
You have to post income as income
You seem to labor under the impression that since your AirBnB revenue just pays your mortgage, that produces little or no income to tax. That would be the "in my wallet" accounting system, which IRS does not recognize. They recognize Cash or Accrual systems. In both of them, all the gross income from AirBnB posts as income.
And then, you charge expenses against that, to the extent allowed by law, either as a business expense or as a personal deduction.
Limiting income pretty much never makes sense
Since you get to deduct all your business expenses regardless... and since all your income is income... unnecessarily making less money just doesn't make any sense. If your incremental tax rate is 25%, you are always better off earning $100,000 and paying $25,000 taxes -- than earning $40,000 and paying $10,000 taxes.
Unless something very unusual is going on with your cost-of-doing-business, or this pushes you over a limit for eligibility for some government assistance like healthcare or food stamps. The idea of holding back a business from success sounds like some goofball hyper-intellectual "way overthinking it" deal, like communism, and Mr. Schaub should maybe stick to real estate :)
If someone else had a stake in the business, it would actually be a breach of fiduciary duty to shortchange the business that way, because they would suffer unnecessarily. I mention that because you say "about 50%" and "about 25%". You must answer to your other 1 or 3 partners as to why you are limiting their share of the profits.
Mortgages are not expenses, only the interest
If that 50%/25% merely reflects financing (mortgage), then they're not partners, you owe a mortgage. Correct accounting is: you own 100% of the house (in assets), a mortgage (in liabilities), and mortgage interest (in expenses, which impacts profit/loss statement). Note that paying mortgage principal doesn't post as anything at all on the P/L statement. You're taking a cash asset, and using it to pay down liabilities, which increases net assets, but it's a paper asset. Merely converting one kind of asset to another cancels out and has no effect on the P/L. The P/L is essentially what you pay taxes on.
Since mortgage principal doesn't cancel out income, the income used to pay the mortgage principal posts as a profit.
LLCs do not work that way ... unless you ask
However, I'd like to know about opening an LLC under these circumstances, so I get a tax advantage on my costs for these two properties I'm renting out (HOA and property taxes). Also, my wife will be informally working on maintaining these properties, fixing issues, hiring contractors when necessary, etc. We would like to deduct her costs as well.
The IRS ignores LLCs. To be more precise, a single-member, pass-through LLC is a disregarded entity. For IRS purposes, all of its assets, liabilities, income and expenses simply fall into your personal taxes and life situation. Each LLC asset is your individual asset. Each bit of gross income is your gross income. Each LLC expense is taxwise treated as your personal expense.
So... Tax advantage? You already get it (or not). Being able to deduct wife's "costs"? You either already can, or you can't. Forming an LLC doesn't give you any new tax advantages you didn't have already, because it is passing through.
Things get a great deal more soupy if two separate 1040s are splitting an LLC, but the principle applies: everything passes through.
What's that "pass-through" business? Well, if you really, really want to, the LLC can elect corporate tax treatment, where it taxes just like a corporation. It is its own "man" so to speak, maintains totally separate accounting books, files its own annual Form 1120 (instead of 1040), reports profit/loss separately, and you take money out by collecting salary or issuing dividends. This is a lot of work, and defeats most of the simplicity that makes LLCs attractive.
Then why do people like LLCs so much? Liability. If your LLC has problems or gets sued, and the LLC goes bankrupt, then the LLC can walk away from all its debts, while your credit is untouched. This is a trait it shares with a corporation, so you get the liability shield without all the paperwork and double taxation. Of course, the bank knows this, so will be reluctant to write the LLC a mortgage unless you co-sign.
