You can raise deductibles very high.  

I haven't "pay myself" yet so how to do it and its tax repercussions are still unknown to me.I was under the impression that paying my wife as an employee would help me get some deductions and would be beneficial at the end.

And yes, I would rather have a property producing 28% returns in my IRA than a promissory note at 12% or, say, shares of a mutual fund.Since taxes are not paid on the rental income received by the IRA, there is no need for deductions against that income.  

The tax exclusion is if you've lived in the property in any 2 of the last 5 years, so no you would not qualify for this deduction.1031 is available as an option.You can move back in to regain the tax exclusion.You can try to offset any potential gain through losses elsewhere in your portfolio.Best of luck!

Any expenses you incur operating your rental property will be deductible on your tax return.

@Levi ThorntonThanks I am still awaiting a response from the lawyer

Also read the fine print so you understand coverages and deductibles.

This is in an effort to ensure they can collect as much as possible without dealing with silly things like deductions etc.

You should also remember, if the building is your primary residence, than your input expenses {i.e. renovation costs} are not deductible from the proceeds of the sale ... this might very well negate any taxation benefit.

Is the mortgage interest tax deductible?