Holding Tenant Security Deposit in High-Yield Savings Account (NJ)

[Mark Carbonaro]

I've got a great tenant and would like their security deposit to earn them as much interest as possible. The problem I'm encountering is most of the high yield (> 4.00%) savings accounts I've looked into don't seem to offer the appropriate structure:

- I could open an individual savings account, but the interest accrued (> $10) would be reported to the IRS as taxable income under my name.

- I could open a joint savings account, but as the primary owner, the interest would still be reported to the IRS as taxable income under my name. What's more is my tenant would then have access to the funds.

Does anyone know of a high yielding account where I would have sole access to the funds but my tenant would have the sole tax liability? 

Alternatively, since NJ requires landlords return the interest accrued on their tenant's security deposit back to the tenant every year, could I open an individual account, return the $X in interest which gets reported as my income, then report either $X less in rent OR the full amount of rent plus a separate $X operating expense?