PatriciaV
Employee Tax Expert

Investors & landlords

Was this the return of a security deposit that you paid for a rental you occupied? If so, this isn't taxable income. In this case, indicate that the 1099-MISC wasn't related to your main job, was this year income only, and wasn't an intent to make a profit. Then enter another 1099-MISC that reports a negative amount equal to the income. These two entries will cancel each other out when your taxable income is calculated.

 

If this was a security deposit paid to you as the landlord, you may not need to report this as income. A security deposit should not be included in your income when you receive it if you plan to return it to your tenant at the end of the lease. In this case, report the income for your rental then enter an equal expense with a description of "security deposit to be returned to tenant."

 

But if you keep part or all of the security deposit during any year because your tenant does not 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.

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