Refundable security deposit is not rental income as all of the above comments have already noted, HOWEVER, it still MUST be included in GROSS INCOME.
Under the "claim-of-right" doctrine, payments must be included in gross income if the taxpayer receives them without restriction under a claim of right. The claim-of-right doctrine means you have unrestricted free and clear use of the funds. This is true even though you may have to repay all or a portion of the security deposit in the future.
If you have a property management company (which collects the payments from renters, deducts their ?10% fee and then forwards the remaining balance), it will send a 1099-Misc form at year end which would list that refundable security deposit as gross income for the aforementioned reasons.
