1099-NEC on rental deposit

There should not be any double taxation.  You will enter the rents reported on the 1099-Misc in the "Rental, Royalty..." topic for Schedule E.  

The Housing Authority is treating you as a contractor doing work for them as part of the Abused Person Program.  You will report that 1099-NEC income as " Self-employment" and reported on Schedule C.   You are providing services.  You will be given the opportunity to enter any expenses related to this income as well.  For example, you may have had printing, copying and/or mailing or supplies costs.  Do not double count expenses here with rental expenses which you will put on schedule E

The net self-employment income is subject to self-employment taxes (social security and medi-care taxes).  TurboTax will calculate and report these taxes automatically when you enter the 1099-NEC data and any expenses.

I have read different options, such as backing it out with a negative 1099-NEC. I will report the bonus amount but the deposit since it will be returned at a later day IRS says not to report it. I am confused.

It all depends on how it is written in the agreement when it comes to the deposit.  If the 'deposit' is for first or last months rent, then you must report it. On the other hand, if it states that it is a deposit to be returned at the end of the lease if the property is in the desired condition then it's basically an 'escrow' amount and is not yet completely unrestricted and available for your use. A deposit is not required to be reported until you have an unrestricted right to the funds.

• Security deposits. Don’t include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant doesn’t live up to the terms of the lease, include the amount you keep in your income in that year. If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Include it in your income when you receive it.

Again, if you are performing what the Abused Program considers services for the program, then it could be considered self employment as indicated. Or as mentioned in another post, if you believe this is not because you performed a service for them, then the bonus can be considered other income.

@MM5475