Not Rented for Profit

California

I own a house, which I lived for 2 months out of 12 months in 2006, and then rented out for the rest of the year. I moved to a rental place to be a in good school location. I pay more in rent than the rental income that I recieve. Since I am not making any profit from my rental income, does it qualify for "Not Rented for profit", and therefore do not need to report the rental income.

If I must report my rental income,can I also deduct mortage interest from my rental income and as personal expense as second home, since I have lived for 2 months in 2006.

I don't even know where to start. First, forget about everything you know. Next, you will report the income and expenses of the rental home on Schedule E. You will take 10 months of morgage interest as an expense on the rental property. Since you will probably not have enough itemized deductions for schedule A, you will probably take the standard deduction. Having a rental property is an interesting tax issue and you should get your return prepared by a professional this year. If you can't get in to see one, file an extension and see one as soon as you can. With depreciation and whatnot, I'd guess you won't have an income on the rental property. But, the income from the rental has nothing to do with being "not rented for profit" or with the amount you pay in rent.