Is a tenant’s deposit taxable?

Understanding rental deposits and their income tax implications

WHEN ENTERING into a property lease agreement, it is common for a landlord (lessor) to require the tenant (lessee) to pay a rental deposit, also known as a security deposit.  This deposit serves as financial protection for the landlord against possible damage to the property, unpaid rent, or other obligations under the lease.

Two questions are normally asked by landlords when it comes to dealing with rental deposits – the legal requirements for levying and holding such deposits, and the tax implications thereof.

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