Profit or loss doesn't matter. If your "intent" is to make money, then it's reportable income on SCH E. Just because the rent does not exceed the mortgage in no way means you're not making money. For starters, the entire mortgage payment is not deductible. Only the mortgage interest is.

But understand that it is common for rental property to always operate at a loss "ON PAPER" at tax time. When you figure in the depreication you are required to take by law and add that to the deductible expenses of mortgage interest, property taxes and insurance, it's rare for rental property to ever show a taxable profit. Add to that your other expenses (repairs, maintenance, etc.) and you're practically guaranteed to operate rental property at ever increasing losses with each passing year.

So the fact you're not making a profit does not mean you are not making money. WHile what you have may be a cost sharing arrangement on the federal taxes, that in no way means the state sees it that way if your state also taxes personal income.