Earnest money from failed sale of home contract

[RobGLA250]

I had a situation where a buyer did not close on purchase of my home.  Fortunately I quickly found another buyer and the sale went through with them.  I took the first buyer to court to recover the earnest money that was held by the closing company.  After a settlement, I have now received the held money.  Can anyone confirm if the earnest money I received is considered short term capital gain, normal income or can it be included in the proceeds from selling my home.

[Anonymous]

 A seller who retains both the earnest money deposit and the property must treat the forfeited deposit as ordinary income.  

[Anonymous_]

I agree with @Anonymous - the retained earnest money is ordinary income; there was no sale or exchange.

In TuboTax, you would enter this in the Less Common Income section by clicking the Start (or Update) button to the right of Miscellaneous Income, 1099-A, 1099-C.

[RobGLA250]

Thanks to you both for your expert replies

[mmasse]

What if the expenses outweigh the earnest money paid

[DaveF1006]

The expenses are non-deductible.