In general you will be taxed on income earned on the rental and you can deduct interest paid on the mortgage. 

Insurance deductibles are not worth claiming on any side of this (Actual damage $1500, minus scrap).

Your landlordmust itemize any deductions from the full deposit amount.

Also consult an accountant, as a house hack would bring mortgage interest deduction benefits.Whichever nets you more, should be the answer.

Also, don't forget about your insurance company for damages, the adjuster will deduct normal wear and tear, you may also be entitled to rent lost while you are bringing the property back to a rentable state.

Just remember in California the State hits you with ~$800 a year per LLC as part of their annual fee for having a LLC...https://www.biggerpockets.com/forums/61/topics/827155-starting-an-llc-after-two-propertieshttps://www.biggerpockets.com/forums/51/topics/838628-accounting-for-landlord-flipperhttps://www.biggerpockets.com/forums/51/topics/839992-tax-deductions-on-rental-rehabshttps://www.biggerpockets.com/forums/109/topics/839738-did-you-create-an-llc-when-you-began-aquiring-properties

The verbiage used was "The names given being those of owners or occupants as the same appear on the assessment rolls for the levy year 2017". 

You still have interest deductions, you have inflation which also contributes to debt destruction, you have limited risk reduction from lawsuits through encumbrance. 

Is it worth purchasing that property and take a full depreciation deduction on year one, Then rehab it a few years down the road for lease or sale? 

From your numbers posted, it’s kind of an irrelevant question....You bought for $1MYou spent $170k fixing it upIf you Net $1.35M from the sale, and didn’t deduct the $170k as expenses, your Cap Gain is $165k, below the $250k limit(for a single person) for One 121 exclusion.So, if you have only $100k in improvements you didn’t expense, your full gain will be exempt, if you Net 1.35 after sale/closing costs.