Typically, a rental security deposit is not reported as an expense by the payor, or as income by the recipient. The original payment of the deposit is not a reportable event. Likewise, the return of said deposit is also not a reportable event. The event only becomes reportable if the recipient retains all or any portion of said deposit at the end if the lease. Again, I stress this is "TYPICALLY" how it's done. Nothing says it has to be done that way.
Did you report the security deposit as an expense when you paid it? If so, then you also report it as income when it's returned to you.
