Self employed

1. Do I report this as "rental income". You report the rental income on Schedule E. The fact that you have an LLC does not make this a business.

2. Can I deduct closing costs? No, they are added to the basis of the property.

3. Can I deduct the mortgage interest paid? Yes, on Schedule E.

4. Can someone explain how I can make use of depreciation? Enter the property in the Asset section of Schedule E. The property will be depreciated over 27.5 years. You will have to separate out the land costs.