It is a not-for-profit since you are charging your friend less than you would anyone else. It is a second home.
No, see below for instructions from the
IRS on how to treat this type of property. Since you do not carry on your
business or investment activity to make a profit, you cannot use a loss from
the activity to offset other income. You do not therefore, need to depreciate.
Not
Rented for Profit
If you do not rent your
property to make a profit, you can deduct your rental expenses only up to the
amount of your rental income. You cannot deduct a loss or carry forward to the
next year any rental expenses that are more than your rental income for the
year.
Where to report. Report your
not-for-profit rental income on Form 1040 or 1040NR, line 21. If you are filing
Form 1040 and you itemize your deductions, you can include your mortgage
interest and any qualified mortgage insurance premiums (if you use the property
as your main home or second home), real estate taxes, and casualty losses on
the appropriate lines of Schedule A (Form 1040). Claim your other rental
expenses, subject to the rules explained in chapter 1 of Pub. 535, as
miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or
Schedule A (Form 1040NR), line 9. You can deduct these expenses only if they,
together with certain other miscellaneous itemized deductions, total more than
2% of your adjusted gross income.
Presumption of profit. If your
rental income is more than your rental expenses for at least 3 years out of a
period of 5 consecutive years, you are presumed to be renting your property to
make a profit.
More information. For more
information about the rules for an activity not engaged in for profit,
see Not-for-Profit Activities in
chapter 1 of Pub. 535.
https://www.irs.gov/pub/irs-pdf/p535.pdf
