The security deposit is a guarantee, a bond, a pledge, or corresponds to deposited and accepted funds to ensure responsibility. It serves for the property owner to ensure that the contract will be fulfilled, safeguarding the payment of rent and the repair of any damages that may be caused to the property and/or furniture.
Regarding the security deposit received in relation to a lease agreement, the received amount is considered rental income.
In this context, the property owner must issue an electronic receipt for the amount of the security deposit, in addition to the rent amount (initial month) and advance rent (if applicable).
The Tax Authority (TA) has clarified that security deposits received in the context of lease agreements must be declared for IRS purposes in the year they are received.
In the event of the return of the security deposit to the tenant, it can be considered an expense incurred and paid by the landlord in the Annex F of the model 3 tax return for the year in which the return occurs.