So what is the right thing to do here in this situation? I am confused. Do I treat this as a Rental because I am receiving some income to help defray some of the expenses holding onto our previous residence by letting my son live there? Or do I treat this as Miscellaneous income because my objective isn't to have higher than market rental expenses for the deductions that may result on our Federal return? Then the next part is what do with the state of Virginia return since, if I treat the residence as a rental, then I assume Virginia requires a state return to be filed to determine if tax is owed unless there is a loss caused by expenses being higher than rental income.
