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Is it beneficial to convert non-investment real estate to rental if I need to make major repairs? (USA/Missouri)
I think you may have a significant misunderstanding here.  You have been renting your property out for two years, now.  There is no special "roommate" clause in the tax code; roommates are renters, and the rent they pay is rental income.  (If they were roommates in a property you both rented from a third party, that would be different.) See publication 527, chapter 4 for more details on the subject (search on "Renting Part of Property").  You should be: You may also consider "Not renting for profit" section, which may be closer to what you're actually thinking - of changing from "Renting not for profit" to "Renting for profit".  Not rented for profit means you can report on your 1040 as opposed to filing Schedule E, but it does mean you have to actually not make a profit (and remember, some of the money that goes to paying the mortgage is not deductible on this side of things since it's your property and you'll get that money back, presumably, when you sell it). If that is what you're asking about, it sounds like it's just a matter of money.  Are you going to start making money?  Or, are you going to start making enough significant upgrades/etc. to justify the tax deduction?  You should consider the actual, specific numbers carefully, probably with the help of a CPA who is familiar with this sort of situation, and then make the decision that gives you the best outcome (keeping in mind that there may be long-term impacts of switching from not-for-profit to for-profit rental treatment).