Kaution
The tenant's security deposit — not income while you only hold it.
The Kaution is the security deposit a residential tenant provides, capped at three months' cold rent by §551 BGB and to be kept separate from the landlord's own money. Because it remains the tenant's money, receiving it is not rental income and paying it back is not an expense. It becomes income only when and to the extent you keep it to cover unpaid rent or operating costs; when you keep it to pay for damage repairs, the retained amount is income and the repair cost is deductible. Interest earned on the deposit account belongs to the tenant. Record retained amounts in the year you set them off, and keep the settlement letter to the tenant as the supporting document.
Last reviewed: by Yann Lephay.