Use the cost of the repairs to deduct the price negotiated.

Code §92.0561(b).Repair & Deduct RemedyA tenant also has a procedure to repair and deduct if certain requirements are met.

Add in the real gain to you of a few hundred $ per month from principal paydown, and add in a hundred or two $ per month in tax deductions and suddenly holding the property can look quite good. 

If he does leave in a few days  he pays rent everyday he is there and make any other deductions.

That is what gets deducted of the rent monthly.

You also lose the benefits of interest and tax deductions.

If no, you have to recalculate to make sure you are taking into account all future expenses and deducting it from your cash flowRegarding the ROI itself ... 300*12 = 3600With an investment of 55000, you are getting in the mid single digits cash on cash return ...You can do better.

I want to have the best tax strategy that can maximize our take home income by taking deductions from my salary along with rental income that may not be otherwise possible due to my high w2 income.

@Jef A.Hey Jef - Looking at the scenario you stated above, you may consider looking into your personal tax scenario (standard deduction vs itemized deduction) and any limitations on mortgage interest deductions on your primary home mortgage.

What do you think would be the appropiate deduction from her security deposit?