Re: Accounting for the tenant's deposit - Landlord Forum thread 348462

Re: Accounting for the tenant's deposit by Steph (TX) on September 19, 2016 @17:22

No, the security deposit is not income to you. You have not received it, you have no control over it, and most importantly, it is the property of the tenant.

Conversely, the deposit refund is not an expense to you either. You can expense any amounts you paid for repairs, at which point any of the security deposit withheld for same becomes income to you. This happens when the security deposit is settled, not when it is initially paid by the tenant.

For example, the tenant pays $1000 on Jan 1 for security deposit. When they move out on December 31, the total amount of damages done by them that you have to pay to repair is $400. The tenants get $600 back, the property management company releases the $400 to your account so you don't have to pay out of pocket for the repairs. You have $400 in expenses and $400 in income for a net zero gain.

Same scenario, except the tenants leave the place pristine. They get $1000 back. You have no income and no expenses.

Same scenario, except the tenants do $1800 of damage. You send a check to the management company for $800 to cover the excess of the repair cost over the deposit amount. You have $1800 of expenses and $1000 of offsetting income. If you later recover the remaining money owed from the tenants, it is income when it is recovered.

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