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Level 1

How to treat reimbursement for damages?

I had a tenant do some damage to my unit and the cost exceeded the security deposit. 

 

I created an invoice that listed the damage, and applied the security deposit to that invoice. I then received a check for the remaining amount. 

 

When I deposit it, it shows up as "Other Income." But it's not really income. I paid for the damages to be fixed, and this is reimbursement for those expenses. 

 

How should it be treated, so it doesn't show up as "Other Income?"

 

Thanks in advance!

2 Comments
Community Champion

How to treat reimbursement for damages?

You should have a separate charge for damages and then apply the payment to it.  You can call the income account anything you wish, but......Scedules C or Form 8825 has only ONE line for real estate income (other than royalties on a Schedule E) and thus at tax time every dime you collect from tenants is "rent".

Level 1

How to treat reimbursement for damages?

So EVERYTHING a tenant pays to me is considered income? Yikes. That doesn't seem right! 

 

 

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