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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!

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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