Reporting Income and Deductions(p23)

When you use a dwelling unit both as a home and a rental unit, expenses must be divided between rental use and personal use, and you will not be able to deduct rental expenses that are more than your rental income for that dwelling unit.

Use Worksheet 5-1 to divide your expenses between rental and personal use. Follow the rules listed in chapter 3 to report your rental income and deductions. Personal expenses are not deductible except in the case of certain items such as mortgage interest and real estate taxes, which can be deducted if you itemize your personal deductions on Schedule A. See the instructions for Schedule A for more information on deducting these expenses. If you cannot itemize your deductions, see Adding real estate taxes to standard deduction in chapter 4.