If you are renting to relatives, defined in section 267(c)(4) of the tax code to be owners and their siblings (whole or half blood), spouse, ancestors, and lineal descendants, then there are two requirements to be able to treat it as a rental property. One is they must be paying at least 80% of fair market rent. The other is they must be using it as their primary residence. These specific requirements apply when it's family renting it.
If both those things are true, then it's Schedule E rental income.
If both of those things aren't true, then the income is still taxable (reported as miscellaneous income), but you can't deduct any expenses (that's bad). You can still claim the mortgage interest and property taxes if you qualify to claim those on your itemized deductions.
