IRS PUB 525 (I know pubs are not authority...)
Limit on deductions.
Renting a dwelling unit that is considered a home isn’t a passive activity. Instead, if your rental expenses are more than your rental income, some or all of the excess expenses can’t be used to offset income from other sources. The excess expenses that can’t be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Any expenses carried forward to the next year will be subject to any limits that apply for that year. This limitation will apply to expenses carried forward to another year even if you don’t use the property as your home for that subsequent year.
To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5-1.
and from the Big Book:
DEFINITION OF A “DWELLING UNIT”
For purposes of the vacation home rules, a dwelling unit is property that provides basic living accommodations,
including sleeping space, toilet, and cooking facilities. A single structure may contain more than one dwelling unit.
If a taxpayer rents rooms or other space in a home and the rented portion does not have facilities that would make it
a dwelling unit on its own, the taxpayer and the renter may be considered to be occupying one dwelling unit, and loss
on the rental may be disallowed under §280A. This does not apply to hotel or motel units, etc., regularly available for
occupancy by paying customers, but may apply to a portion of a home used to furnish lodging to tourists or to longterm
boarders, such as students. See more about “Room Rental” on page 3.18.04.
Nilodop- "Hint - see section 280A(e)" To be honest I just can't figure out what this means. To me it makes sense for a real vacation home (sort of) but not a room in ones primary home.
(e)Expenses attributable to rental
(1)In general
In any case where a taxpayer who is an individual or an S corporation uses a dwelling unit for personal purposes on any day during the taxable year (whether or not he is treated under this section as using such unit as a residence), the amount deductible under this chapter with respect to expenses attributable to the rental of the unit (or portion thereof) for the taxable year shall not exceed an amount which bears the same relationship to such expenses as the number of days during each year that the unit (or portion thereof) is rented at a fair rental bears to the total number of days during such year that the unit (or portion thereof) is used.
And now back to that pile on my desk!