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If you convert the property into rental - you will report rental income and deductions on the schedule E - http://www.irs.gov/pub/irs-pdf/f1040se.pdf
If you would have losses from the rental activities - such losses are generally deductible, however some limitations may apply because rental real estate activities are considered passive activities. You may deduct up to $25,000 of net losses if your adjusted gross income is less than $100,000 ($12,500 and $50,000 for married filing separately) - please see details in the instructions page 2 - http://www.irs.gov/pub/irs-pdf/i1040se.pdf Any disallowed losses would be carried over to the next year.
let me know if any clarification needed.