So I have the same exact question. Only I have over $70,000 in security deposits gaining interest. State requires this to be returned with interest if Tenant occupies the property for a year or longer only. So I don't always have to return it with interest. So the bank has sent me a 1099- INT showing over a $1000 interest payment for 2019. I assume I need to report all this as income. So my question is how do I record the portion of this that I had to pay back to Tenants? For the purpose of this question let's just say I had to pay back $500 of that thousand to Tenants this year.
