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.

BREAKING DOWN '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. Deposit

    1. A transaction involving a transfer of funds to another party ...
  2. Deposit Interest Rate

    The interest rate paid by financial institutions to deposit account ...
  3. Direct Deposit

    Electronic funds that are deposited directly into your bank account ...
  4. Core Deposits

    The deposits made in a bank's natural demographic market. Banks ...
  5. Bank Deposits

    Money placed into a banking institution for safekeeping. Bank ...
  6. Demand Deposit

    Funds held in an account from which deposited funds can be withdrawn ...
Related Articles
  1. Personal Finance

    Where To Put Your Cash: Call Deposit Vs Time Deposit Accounts

    Time deposit accounts and call deposit accounts allow customers to earn higher interest in exchange for less access to their cash.
  2. Investing

    How Time Deposits Work

    A time deposit is an interest-bearing bank deposit that has a specific maturity date.
  3. Investing

    What is a Demand Deposit?

    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.
  4. Managing Wealth

    Top 5 Ways to Protect Yourself Against Problem Renters

    Renting seems like the perfect way to mitigate the costs of an extra home that won’t sell; the intended course of action when a property was purchased for an unbelievable price, or many of the ...
  5. Investing

    8 Lease Clauses You Need To Know

    If you're renting an apartment this year, beware of signing contracts with these tricky clauses.
  6. Insights

    Starbucks Has More Customer Deposits than Many Banks (SBUX)

    Recent financial analysis conducted by Standard & Poors shows that Starbuck's holds more customer deposits than several American banks.
  7. Personal Finance

    Explaining the Reserve Ratio

    Reserve ratio is the amount of cash a bank must keep in its bank vaults or deposit into a central, governing bank.
  8. Managing Wealth

    4 Things Landlords Aren't Allowed To Do

    Whether you're a landlord or a tenant, you need to know the rules.
  9. Personal Finance

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  10. Investing

    The Complete Guide To Becoming A Landlord

    Being a landlord can be a fulfilling and financially rewarding experience. However, the decision to become a landlord should not be taken lightly.
RELATED FAQS
  1. What are the Federal Reserve's guidelines on demand deposit accounts?

    Read about some of the Federal Reserve's requirements and guidelines regarding the treatment, safeguarding and processing ... Read Answer >>
  2. For what types of accounts are demand deposits available?

    Learn about the different types of accounts designated as demand deposit accounts, such as savings accounts and money market ... Read Answer >>
  3. What proportion of my income should I put into my demand deposit account?

    Find out how much money to keep in your liquid demand deposit accounts, such as checking or savings accounts, and discover ... Read Answer >>
  4. What are the benefits of splitting my tax refund?

    If you receive a refund when you file your tax return, there are some convenient options you can take advantage of. Read Answer >>
Hot Definitions
  1. Profitability Index

    An index that attempts to identify the relationship between the costs and benefits of a proposed project through the use ...
  2. Restricted Stock Unit

    Compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock ...
  3. Operating Ratio

    A ratio that shows the efficiency of a company's management by comparing operating expense to net sales. Calculated as:
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  6. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
Trading Center