QuickBooks and Security Deposit

[Bryan Petrinec]

I am looking for some guidance on managing security deposits, repairs, and return of the balance from a bookkeeping standpoint.  This is the first time I am going through this and I want to make sure I am handling it correctly in QB (I use Desktop Pro 2018).

The security deposit was held as "Other Current Liability" for the the sake of this discussion was $1000.

Tenant moves out - some minor repairs are needed that are charged back to the tenant in the amount of $200

I pay my handyman $1500 to turn the apartment, which includes repairing the tenant damage

So here is my confusion - I pay the tenant the remainder of the SecDep of $800 from the Security Deposit account.  Do I allocate the $200 remaining to the operating account and then becomes income?  Or do I spit the repairs (or ask for 2 invoices) and pay the $200 directly from the SecDep account to cover the repairs and keep the remaining $1300 in repairs and maintenance?  Come tax time, I assume either way I can only deduct the $1300 and not the full $1500.  

Again, this is my first go at this and I want to make sure I am doing right now to prevent issues later.  Thanks in advance.

[Account Closed]

Bryan 

When a tenant does damages and you pay a handyman or anyone to do the repairs and intend to make the tenant pay you back, it is never considered INCOME.  It is a REIMBURSABLE BILLING and is done on the bill or check that you type up in QuickBooks through the Vendor Center from the bill you received from your handyman. 

The reason you do this as a REIMBURSABLE BILLING is due to the fact that it is not INCOME.  You don't want to be put into a higher tax bracket at the end of the year due to you entering in this payment as Income when you really didn't make that money.  You paid for the repair and the tenant paid you back.  It is a wash.  

If the tenant never pays you back then the repair becomes a normal expense account, and of course, you don't have any money because they never paid you so in this case you wouldn't have to worry about you being thrown into a higher tax bracket. 

Once again it must be done as a REIMBURSABLE BILLING.  You would do this for NSF Fees due to tenant's bouncing a check and the bank charging you a bounced check fee.  You bill the tenant and they pay you back.  That money is not considered income.  

We never want to say we made more income then we actually did.  Who wants to pay more taxes at the end of the year when we never received this money as income. We paid it first, they paid us back.   

It would take too long to tell you in great detail how to do this and I apologize for that. 

Also, Victor is correct  as to how to deduct it, but there is more to it than that as well. 

Nancy Neville