My advice pay the taxes, enjoy the nicer neighbors, higher rate of home owners then at tax time put those taxes against your deductible income and save on taxes...your welcome :)

If it were me and I had to take it, my first attempt would be to sell it for whatever I could get for it, option 2 I'd dig into the legality of a bit more but I'd donate it to a charity/ nonprofit I DON'T like just for the tax deduction and burden them with the property taxes.

@Lalainya Rawlings Costs related the flip (purchase price, rehab, holding costs, etc.) are not deductible until the property is sold.

Is it ok to take deposit on water, and deduct from that if the tenant doesn't pay?  

@Sung Park is correct - if you do not take the depreciation deduction when you were eligible to, you are still subjected to the depreciation recapture of the amounts you were supposed to have deducted.

Not to mention interest paid on your mortgage is tax deductible.

I second @Levi T.  

On a couple of deals I bought the seller paid for AHS, deductible was much lower back then, and I felt as if none of them paid off.

Total insurance payout: $6,663 ($7,663 less my $1,000 deductible).

Nice finds, Levi!