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Is rental security deposit income?
originally posted: 11/22/2006
reposted: 2/18/2011 This post has not
been recently reviewed or revised by the author and may be out of date.
If you notice an error or are in doubt, please send a new question by
email or ask for an update. Email asktony@tonynovak.com.
Q: I will receive a $1000
security deposit when I rent our second home for the first time next
month. Does this have to re reported as income?
A: Rental security deposits can
either be income or not, depending on how you arrange the lease and how
you handle the money. If the lease allows the security deposit to be
used as last month's rent, then it is taxable as income when received.
If the lease states that the security deposit cannot be used as the
last month's rent, and especially if you deposit the security deposit
in a custodial account set up for this purpose (depending on the custom
and procedures of local law), then it will not be taxable.
Summary
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