With six people in 1300 square feet of space, I would convert the entire garage to living space. I would do a full bathroom, not a half bath.

I agree with graywings. I'd make the converted space as large as you can afford and leave the rest as a storage area for lawnmowers and the like. Perhaps you can ask a local realtor for an opinion on what to do and how much to spend. And you should probably ask the city if they have any restrictions. Can your plumbing handle the tying in process (I was told never to touch mine & it would outlast us, touch it and it will shatter). How about your electrical? Will this construction open up an expensive can of worms? Good luck.

Thanks for the ideas, I had never considered finishing off the whole garage, maybe when we adopt 4 more kids ;) That would totally work with our house too because we have a cape cod and the garage is strangely under the left dormer on the main house where the symmetrical window should be ...any how we are planning a basement finish in the future too when our kids (all 5 and under) are bigger and adding a 4th bedroom and 2nd full bath. My main concern is resale if our garage is only 18.5 feet long (double checked and our garage is actually 23 ft deep) I think we are going to go for it. I know our electrical is good because it was upgraded right before we bought the house. Hopefully our plumbing will last, we already monkeyed with it once opening up the kitchen to the dinning. Thankfully all our plumbing is on one wall, easy if something becomes a disaster :)

a small one car garage (10'x20')

You could fit an Escalade ESV into that "small" garage.

But feel free to convert it to living space. Except where there are rules against keeping vehicles on driveways overnight, most people use their garages for everything but parking.