How to properly apply tax deductions

[David Pugh]

Hi all - I'm just starting out my plans to invest in a rental property. I've built a pretty good model, but I'm trying to figure out one key aspect around taxation. For my example, let's assume the following year 1 parameters: 

• Property generates $30,000 in effective rent 
• Requires $18,000 in expenses 
• NOI of $12,000.
• Debt service is $7000 
• Annual cash flow is $5,000. 
• This property has $29,000 in tax deductions (including mortgage interest and depreciation)

My real question is against what is the $29,000 applied? NOI? Gross receipts? Cash flow?

Any insight on how this piece of the formula works would be awesome. 

Thanks from a newbie! 

Dave