If I report the deposit made in 2018 for a 2019 rental week and I rent for fewer than 14 days in 2019, how would I get a refund for the tax paid on the deposit?
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If you are on a cash basis (rather than accrual) you report income when you receive it. However, security deposits are not included in income when you receive them if you plan to return them to your tenants at the end of the lease. In contrast, deposits for the last month's rent are taxable when you receive them, because they are really rents paid in advance.
If you are on a cash basis (rather than accrual) you report income when you receive it. However, security deposits are not included in income when you receive them if you plan to return them to your tenants at the end of the lease. In contrast, deposits for the last month's rent are taxable when you receive them, because they are really rents paid in advance.
Cash basis taxpayers report income when they actually receive it, and expenses when they actually pay them.
The exception is if you set up your business to use the "accrual" accounting method. But this is complicated, requires an accountant to help you set up, and is uncommon for small businesses. If you had an accrual accounting method, you wouldn't be asking this question.
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