State tax filing

Yes, you have a good overall understanding.  

>>Take-away:  In order to be considered as Rental Income by the state of PA, the property has to be subject to depreciation.

1. Not exactly. If you own a rental property you will have depreciation on the cost of the property, but you will continue to have rental income even when the depreciation is done in the future (regardless of personal property (anything that is not real property, does not refer to personal use) or real property (land, buildings and structural components).
2. C1. This is correct. PA uses the federal depreciation.
3. C2. The property is being rented for less than fair rental value, no profit motive and therefore expenses as well as depreciation would be limited at the federal level.  

PA does not allow the loss either.  The loss will not be used against any other income category in PA. Schedule E is not required, however in the PA return you should be able to offset the income by the expenses or enter an adjustment to make this income zero.  It does not work the same way on the federal and you just need to keep records to show your what your expenses were and this can include depreciation.  I will show the chart below for 27.5 year property rates of depreciation for each year.  

The miscellaneous income will flow over to PA from the federal return. 

Where to report on the federal return:

Report your not-for-profit rental income on Schedule 1 (Form 1040), line 8. If you itemize your deductions, include your mortgage interest and mortgage insurance premiums (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.

Sign into your TurboTax account:

1. Click Federal in the left column 
2. Click Wages & Income at the top
3. Scroll down to Less Common Income. Click Show more
4. Start Miscellaneous Income, 1099-A, 1099-C
5. Start Other reportable income
6. Say Yes to Any Other Taxable Income?
7. Enter a description and amount

@Keystoneguy