It is not just a second home if she is collecting rent. How much rent she collects determines whether or not it is a rental.
A Not-for-Profit rental does not charge full rental value. It generally relates to a family member staying there and helping to cover the costs. The rent received is income.
Not Rented for Profit
If you don’t rent your property to make a profit, you can’t deduct rental expenses in excess of the amount of your rental income. You can’t deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year.
Where to report.
Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8j. If you itemize your deductions, include your mortgage interest (if you use the property as your main home or second home), real estate taxes, and casualty losses from your not-for-profit rental activity when figuring the amount you can deduct on Schedule A.
Presumption of profit.
If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit.
For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Pub. 535.
A rental is when it is rented at full rental value, the same price you would charge anyone off the street. The intent is to make a profit, whether or not you actually make one. Almost all expenses of producing income are deductible.
