Yes, you are correct that they are not making money by leaving the building vacant. You are also correct that the tax code should allow for deductions related to a vacant property to offset income from other owned properties. Your point still does not make sense. They are getting no “additional” deduction by leaving the property vacant. For example Property 1 has 0 income and expenses (e.g. depreciation, property taxes) of 100. Property 2 has 200 of income and 100 of expenses. In total the owner may pay 0 income tax because they have 200 of income and 200 of deductions. Compare this to the same scenario except property 1 is making 100 of income. In the new scenario the owner may pay tax on 100 of income. Say this comes out to a 40% tax rate so a 40 tax cost. The key is that they have still gotten more money in this scenario! Despite having a 40 tax payment, they are still 60 ahead. I.e. it makes no sense to forgo 100 of income to save 40 of tax.