Renting to a family member below fair market rental is considered personal use of the home. You would report the income as "Other Income" on line 21 of Form 1040. If you itemize, you may deduct the mortgage interest and property taxes on Schedule A. In this situation, those are the only expenses you can deduct. You do not use Schedule E.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
