How to account for security deposits held in a trust account in QuickBooks?
By the Propfina team · Last updated
A tenant security deposit held in a trust account is a liability to the tenant in QuickBooks. Record the receipt to a trust bank and a security-deposits-held liability. Refund or deduct the same liability at move-out, then prove cash still equals deposits held.
This is the click path for a small property-management office on AppFolio, Rentvine or Buildium that also keeps the trust bank in QuickBooks Online. Pull the deposit-account statement, the tenant-deposit ledger export, and the security-deposits-held register.
What you are holding
The bank shows cash. QuickBooks has to show who that cash belongs to.
| List | Where | What it shows |
|---|---|---|
| Deposit-account bank statement | The bank | Ending balance, refunds, ACH returns |
| Trust register | QuickBooks, the deposit bank | Every receipt, transfer, and refund |
| Security deposits held | Other Current Liabilities | What you still owe tenants |
| Tenant deposit ledgers | AppFolio, Rentvine or Buildium, same cutoff | Whose deposit it is |
A refundable deposit is money you owe the tenant. IRS Topic 414 (read 2026-10-09) says not to include it in income if you may have to return it. If you keep part at move-out, that kept amount is income in that year. Last month’s rent is advance rent, counted when received. Check your CPA.
How to reconcile a property management trust account in QuickBooks Online is the two-way rec after these deposits are in. How to do a three-way trust account reconciliation is the third number: the sum of tenant deposit ledgers.
Set up the bank and the liability
Open the deposit account at the bank first, in the name your state requires. Add it in QuickBooks as its own bank account. Intuit’s chart-of-accounts help (updated 2026-08-05) is All apps, Accounting, Chart of accounts, New account, type Bank, detail Checking. Enter the opening balance from a statement. Adding older cleared items on top of that opening balance counts the cash twice.
Give security deposits their own liability, separate from owner funds: type Other Current Liabilities, detail Trust Accounts - Liabilities, the setup in Intuit’s retainer help (updated 2026-08-04). Name it Security deposits held.
Oregon’s Real Estate Agency (June 2024, read 2026-10-09) says a manager who holds tenant security deposits must open a clients’ trust account just for them, labeled Clients’ Trust Account – Security Deposits or Client Trust Account SD. OAR 863-025-0028 (read 2026-10-09) wants that account’s three-way rec signed and dated within 30 calendar days of the bank-statement date. Texas treats rent and deposits as trust money and bars a personal or operating account (22 Tex. Admin. Code § 535.146, read 2026-10-09). Other states allow one combined trust bank. Check yours.
Record the receipt
Do this when the deposit hits the bank. Memo the tenant and the door.
- Select + Create, then Bank Deposit.
- From Account, select the deposit trust bank, not operating.
- Skip Undeposited Funds unless you already recorded a sales receipt for this cash.
- Scroll to Add funds to this deposit.
- Received From: the tenant. Account: Security deposits held. Amount: the deposit.
- The total must equal the bank line. Select Save and close.
Intuit’s bank-deposit help (updated 2026-08-03) is this window. On Bank transactions, take Match. Intuit’s categorize help (updated 2026-08-24) treats Post as a new ledger entry. Categorize on a deposit already in the register records the cash twice and usually books it as income.
Keep tenant ledgers in the property-management software. Use Bank Deposit in QuickBooks so the tenant never becomes a customer invoice. On r/QuickBooks in April 2023 the same job was debit cash, credit a rental-deposit liability, then reverse it on the refund.
Move the deposit between accounts
A move-in check often mixes first month’s rent and the deposit. Split the lines, then move the deposit cash if your state wants it in its own account.
| Piece | Account in QuickBooks | Where the cash ends up |
|---|---|---|
| First month’s rent | Owner funds held | Owner trust bank |
| Refundable security deposit | Security deposits held | Deposit trust bank |
Intuit’s transfer help (updated 2026-08-03) is + Create, Transfer, Transfer Funds From the owner trust, Transfer Funds To the deposit bank, amount equal to the deposit line. Date it to the bank date. Oregon’s September 2025 reminder (read 2026-10-09) lets you deposit a mixed check into the owner clients’ trust account, then requires the security-deposit portion in the deposit account within three banking days. Other states set different clocks.
If your state allows rent and deposits in one trust bank, skip the transfer. Split the Bank Deposit so owner funds and security deposits held both move, and the cash stays put.
Refund or deduct at move-out
Work the liability first, then the cash. Example, not a real office: original deposit $1,800, $240 kept for carpet, $1,560 refunded.
- Select + Create, then Check. Intuit’s check help (updated 2026-08-05) is this form. Payee: the tenant. Bank account: the deposit trust. Category: Security deposits held. Amount: $1,560. Save.
- Journal the kept $240: debit Security deposits held, credit Owner funds held, same tenant and unit on the memo.
- If deposits sit in their own bank, Transfer $240 from the deposit bank to the owner trust so the cash follows the owner-funds credit.
A full refund is step 1 only, for the original amount. An ACH refund uses Expense on the same bank and category. Match the bank line.
The kept amount is the owner’s income for tax, unless the firm owns the door. Take the management fee later from owner funds. The deadline to refund or itemize is your state’s.
Prove the cash still matches
Run a Balance Sheet as of the statement date. The deposit bank should equal security deposits held. If those two disagree, stop.
Export every tenant security-deposit balance from the property-management software as of that same cutoff. Add the positive balances. That total has to equal the QuickBooks liability. Oregon’s maintain-CTA page (read 2026-10-09) writes the third number as the sum of all positive balances of individual security deposits and fees. How to do a three-way trust account reconciliation is that packet.
To see the liability by tenant in QuickBooks, open the Balance Sheet, select the security-deposits-held amount, Customize, Rows/Columns, Group by Customer. That report has no floor. QuickBooks Online Plus allows 40 combined classes and locations (Intuit usage limits, updated 2026-08-05). Keep tenant ledgers in the property-management software.
When the lists still disagree
Work bank-to-register first, then register-to-ledgers.
| Symptom | Likely cause | What to do |
|---|---|---|
| Deposit bank higher than the liability | Deposit Categorized as income, or a refund never posted | Reclass the receipt to security deposits held |
| Liability higher than the deposit bank | Refund posted as an expense, or a transfer never recorded | Find the check; Category is the liability |
| Mixed move-in still in the owner trust | Deposit transfer never made | Transfer the deposit line; date it to the bank date |
| Last month’s rent is on security deposits held | Advance rent booked as a deposit | Move it to owner funds |
| Bank rec is $0.00, tenant ledgers still disagree | Two-way rec only | Sum the tenant deposit export |
What the software already does
AppFolio, Rentvine and Buildium win native tenant-deposit ledgers. On their own books, the deposit rec works. QuickBooks Online wins the two-way rec and the CPA file.
| Job | AppFolio, Rentvine or Buildium | QuickBooks Online |
|---|---|---|
| Tenant deposit ledger with a name on every dollar | Yes, that is the product | Control account plus Customer or class |
| Blocks using deposit cash to pay an owner’s bill | Visible on the deposit and owner reports | No floor on a class or subaccount |
| Refund the remainder at move-out | Yes, including AppFolio eCheck (read 2026-10-09) | Check or Expense from the deposit bank |
| CPA-ready general ledger | Extra, or a summary journal | Yes, that is the product |
Rentvine (read 2026-10-09) and Buildium (December 8, 2025) describe the same three-way match. Someone still has to refuse to Categorize a deposit as income, and refuse to send an owner draw from deposit cash.
Rules vary by state. This is not legal advice. Check your own state’s real-estate commission and your CPA or counsel.
How to tell this month is closed
The deposit bank equals security deposits held as of the statement date. That liability equals the tenant-deposit ledger export. No tenant deposit ledger is negative. Last month’s rent is on owner funds. Kept move-out amounts landed on owner funds, with the cash in the owner trust. The deposit-bank rec difference is $0.00.
Pull the deposit-account bank statement, the tenant-deposit ledger export, and the security-deposits-held register in QuickBooks. Start with those three files. They already exist.
Frequently asked questions
Is a tenant security deposit rental income in QuickBooks?
Keep it as a liability while you may have to return it. IRS Topic 414, read 2026-10-09, says not to include a security deposit in income if you may have to return it. If you keep part at move-out, that kept amount is income in that year, usually the owner's. Last month's rent is advance rent, counted when received.
Should last month's rent sit on the same liability as a security deposit?
Last month's rent is advance rent. Put it on owner funds the day it hits the bank, the same as any other rent. The security-deposits-held liability is only for money you still owe the tenant. Mixing the two makes the deposit rec look whole while one tenant's cash is already spent as rent.
Do I need a separate QuickBooks bank account just for security deposits?
Follow your state. Oregon requires a clients' trust account used only for security deposits, labeled Clients' Trust Account – Security Deposits or Client Trust Account SD, with its own three-way rec. Texas treats rent and deposits as trust money and bars a personal or operating account. Other states allow one trust bank. Check yours and your CPA.
Can I post a tenant security deposit to Accounts Receivable?
Accounts Receivable is money a tenant owes you. A security deposit is money you owe the tenant. Use Other Current Liabilities, detail Trust Accounts - Liabilities, the setup in Intuit's retainer help, updated 2026-08-04. Putting the deposit on A/R makes the Balance Sheet look like the tenant is a customer who still owes you.
What do I record when I keep part of the deposit for damage?
Lower security-deposits-held by the original amount. Write the refund from the deposit bank. Move the kept cash to the owner trust if deposits sit in their own account, and credit owner funds for the kept amount. That kept amount is the owner's income for tax, unless the firm owns the door. Then take the management fee from owner funds as usual.