I believe most people overlook the fact that a tax deduction costs you money. It is not a tax credit.
An example would be the interest deduction on your mortgage, figure out what you pay in interest a year and then look at what you save in taxes a year. If you have a $200,000 mortgage at 3.99%, you pay roughly $6,700 a year in interest (the first 10 years). That $6700 is applied as a deduction to your gross income. If you made $150,000 a year (roughly twice the average income of America today) you would have a tax rate of 28%. Thus you are paying $6,700 in interest for a net deduction of $1,876...That cost you $4,824 to save $1,876.
If it was a tax credit, the $6700 would be applied as a deduction to the taxes you owed.
Redwitch is correct, you need to discuss your options with your accountant as there are plenty more variables that would influence the decision. If you do not have an accountant or a professional financial adviser you might wish to get one, as there are many facets to what is tax deductible, and what is not, on rental property.
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