I purchased my first home in March 2002. To cover the cost of my
mortgage, I have a year-round roomate. We share the house equally.

I understand that I will report the rental income as part of my gross
income.

I most interested in how to handle the deductions and the depreciation
(and specifically the certain 'loss' I will have)

Let's use real numbers:

My monthly mortgage is $1000/month. 100% of this morgage is interst (I
have a negatively amortized loan right now).

My roomate pays $500 per month. (fair rental price)

So, since we share the house equally, should I consider 1/2 of my
property my home? And therefore deduct 1/2 of the mortgage interest
and property tax on my Schedule A?

Furthermore, should I consider the other 1/2 of the property a rental
and deduct 1/2 of the mortgage interest, property tax, utilities,
insurance, etc on Schedule E as rental expenses?

So far, I think this is right. Where I get into trouble is here:

In addition to my Schedule E deductions above, I plan to depreciate
1/2 of my property under MACRS (GDS). This depreciation, along with my
other expenses will  bring me to loss.

Can I apply this loss to my other income? (salary is my only other
income) ...I sure do **want** the loss if if I can get it.

According to IRS Publication 527 page 5, there are rules for declaring
a "Dwelling Unit Used as a Home". If the ruling does apply to me, I
believe it limits my losses to my rental income.

Does this ruling apply to me? Is there a way for me to use this loss?
(what if I declare to be 'actively' renting the space and pay SS tax,
etc?). I understand I can carry the loss to later years, but I don't
see a time in the future of this property when I don't have a loss.
(In the next 5 years, I'll probably stop renting the house once I can
pay the morgage myself)

If the depreciation is going to lower my cost basis for when I sell
this sucker in the years to come, I sure would like the benefit of the
loss against my other income.