Security Deposit

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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.

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RELATED FAQS
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    Landlords must set up escrow accounts to hold tenants' security deposits if the accounts are required by the laws of the ... Read Full Answer >>
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    While real estate agents often exclusively service those in the market to buy or sell a home, some can also be excellent ... Read Full Answer >>
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    As long as the building owner is the person or entity that provides leasehold improvements, then the owner can depreciate ... Read Full Answer >>
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