Security Deposit

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. Foreign Deposits

    A deposit made at, or money put in to, domestic banks outside ...
  3. Deposit Interest Rate

    The interest rate paid by financial institutions to deposit account ...
  4. Brokered Deposit

    A large-denomination bank deposit that is sold by a bank to a ...
  5. Transaction Deposit

    A banking deposit that has immediate and full liquidity, with ...
  6. Direct Deposit

    Electronic funds that are deposited directly into your bank account ...
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. Personal Finance

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  3. Investing

    How Time Deposits Work

    A time deposit is an interest-bearing bank deposit that has a specific maturity date.
  4. Personal Finance

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    A demand deposit is any type of account where the money in the account may be withdrawn at any time without prior notice to the financial institution.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

    5 Costs Associated With Renting An Apartment

    What to expect when you, too, move into your first apartment some day (better start saving money now).
  6. Personal Finance

    4 Things Landlords Aren't Allowed To Do

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

    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.
  8. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  9. Retirement

    The History Of The FDIC

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

    The Complete Guide To Becoming A Landlord: Introduction

    A landlord is a real estate owner who rents or leases land or a building to another party. Becoming a landlord can be a profitable venture because it can provide a steady income stream while ...
RELATED FAQS
  1. What is the difference between a demand deposit and a term deposit?

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between these two types ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. When I exchange foreign currency should I deposit it into a revocable trust or a ...

  5. 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 >>
  6. Do landlords set up escrow accounts for their tenants' security deposits?

    Learn when and why landlords place rental property security deposits in separate escrow accounts to make sure the money is ... Read Answer >>
Trading Center