You have a partial not-for-profit rental and a partial full rental. You will have to prorate for expenses. You can't take more expenses than the income your mother pays you for her portion.
- the rent you receive from your mother is other income
- the rent you receive from the real tenants is entered on Schedule E in the rental section.
Yes, you have to claim all the income and for expenses, you will have to treat them as two different properties. The portion your mother lives in is considered your second home. You would prorate your mortgage interest PMI and property taxes:
- your personal home and your mother's percentage of the second home are entered on Schedule A
- the true rental portion is entered on Schedule E.
The percentage of expenses you have for the true rental are deductible in full. You will have to indicate that you "rent out part of your house" when entering the information in Schedule E.
