She owns several properties herself so she is familiar with rentals.Personal taxes for me and the wife, 4 properties, kids deductions, itemized medical expenses, the whole shabang....price went up to $105 this past year.

Also look at self insuring a portion through higher deductibles.

To me it is dumb to be able to deduct the money anyway.

To some extent if your buyer has enough ownership to claim the mortgage interest deduction they have enough ownership to force you through a foreclosure if they default.

The "50% rule" simply says that operating expenses (per IRS regulations) plus vacancy (actual or economic) plus capital (expenses you incur in one year buy must amortize (deduct) over multiple years) will average out to about 50% of the gross scheduled rents.

I wouldn't be surprised at all if you got rid of the mortgage interest deduction on second/vacation homes, but I would be very surprised if they got rid of the deduction for primary residences.That said, this is the reason why many investor recommend not factoring in the tax benefits of real estate into you financial analysis of a investment -- you never know when the tax rules are going to change, and generally speaking, it's not going to be in the investor's favor...

You can deduct these losses against other passive income and sometimes against ordinary income if you meet certain requirements.

Here's some additional information I found on Tax Info Blog: Let's start with the definitions of terms:Repair: deductible; keeps property in good operating condition; does not materially add to the value of property; does not prolong property's useful lifeImprovement: capitalized (depreciated); adds to the value of property, prolongs its useful life, or adapts it to new uses; an extensive series of remodeling repairs is considered an improvementAs you can see, this makes a fairly fine and legalistic distinction.

I was thinking more of a catastrophe where someone gets a judgement for hundreds of thousands of dollars.The insurance company paid for the repairs of the house minus my $1,000 deductible but not for the judgement, the vacancy, my lost time and the headache I went through.

You have many issue regarding the IRS guidelines where you can find yourself in gray areas, you lose the depreciation tax deduction which is a huge benefit to holding RE (the IRA is already a tax deferred account), and there are several other disadvanatges.