Security Deposit

AAA

DEFINITION of 'Security Deposit'

A monetary deposit given to a lender, seller or landlord as proof of intent. Security deposits can be either refundable or nonrefundable, depending on the terms of the transaction. As the name implies, the deposit is intended as a measure of security for the recipient.

INVESTOPEDIA EXPLAINS 'Security Deposit'

Landlords generally apply security deposits as rent from tenants who cannot otherwise pay or use them to repair damage caused by tenants.

Security deposits are not considered taxable income. Local laws often treat security deposits as trust funds. Security deposits that are used as final rent payments must be claimed as advance rent and are taxable when paid.

RELATED TERMS
  1. Key Money

    A payment made to a building owner, manager or landlord by a ...
  2. Twenty Percent Rule

    A deposit requirement instituted by commercial banks for corporate ...
  3. Security Agreement

    A document that provides a lender a security interest in a specified ...
  4. Ordinary Income

    Income received that is taxed at the highest rates, or ordinary ...
  5. Passive Income

    Earnings an individual derives from a rental property, limited ...
  6. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
Related Articles
  1. Can real estate agents help renters ...
    Home & Auto

    Can real estate agents help renters ...

  2. Tips For The Prospective Landlord
    Home & Auto

    Tips For The Prospective Landlord

  3. Top 10 Features Of A Profitable Rental ...
    Entrepreneurship

    Top 10 Features Of A Profitable Rental ...

  4. Tax Deductions For Rental Property Owners
    Taxes

    Tax Deductions For Rental Property Owners

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center