General Landlording & Rental Properties
Market News & Data
General Info
Real Estate Strategies

Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal



Real Estate Classifieds
Reviews & Feedback
Updated over 5 years ago on . Most recent reply

How to financially account for a lost security deposit
Hello all:
When a security deposit is received on a new long-term rental lease, I categorize that in my accounting system as "deposit", separate from rent. It isn't income, doesn't show as a gain, etc.
When that same tenant moves out one year later and forfeits that security deposit, how should I do the accounting? It is now a gain to my company, offset by some loss to contractors for cleaning, carpet replace, whatever.
Most Popular Reply

- Tax Strategist| National Tax Educator| Accepting New Clients
- 4,492
- Votes |
- 3,741
- Posts
When you receive the deposit it's a liability- it's something you potentially need to pay someone back
When they move out you then reduce it by expenses for any move out costs incurred (amounts you're keeping) and then return the balance to the tenant.
So if you have a $1000 deposit
You incur $300 in expenses
You reduce the deposit to $700 and then writing a check to the tenant will $0 that remaining $700
