Have a Tax Question? Ask a Tax Expert
If the person is not related to you and you decided to change a smaller rent - that is still a rental activity and you will be able to report your rental income and deduct rental expenses on the schedule E - http://www.irs.gov/pub/irs-pdf/f1040se.pdf
Because rental activity is generally considered a passive activity - in case you have a rental losses - your deduction is limited by $25,000 - see Maximum special allowance
on the page 14 IRS publication 527 - http://www.irs.gov/pub/irs-pdf/p527.pdf
Let me know if you need any help.