You have depreciation and mortgage interest which generally takes up a few thousand in deductions all by itself. I've been dealing in rental property for over 25 years now, and because of depreciation, I never had a taxable profit on the rental income until a few years after I paid off one rental. It took awhile for all those accumulated carry over expenses to get used up, resulting in a taxable profit from the rentals for my first time ever, after 23 years.
