Where to record pet rent, application fees and other non-rent income
Money a tenant pays that you keep is rental income, whether it is called rent, pet rent, parking or an application fee. Money you must hand back, such as a refundable deposit, is a liability, not income. Set up one income account per type so the profit and loss shows where the money comes from, and sort every payment into one or the other when it arrives.
First question: do you keep it?
IRS Publication 527 lists the kinds of rental income to report, including regular rent, advance rent, payments for canceling a lease and expenses the tenant pays for you. A security deposit you plan to return is not income when you receive it; it becomes income only if you keep part of it, for example for unpaid rent. See security deposit accounting for that entry.
So for every payment, ask one question: is this mine to keep, or will I give it back? Keep it is income. Give it back is a liability.
Where each type goes
| Payment | Book as | Notes |
|---|---|---|
| Monthly rent | Rental income | The main income account |
| Pet rent (monthly) | Pet rent income | Income each month it is received |
| Non-refundable pet fee | Fee income | Income when received, if the state allows it |
| Refundable pet deposit | Deposits held (liability) | Not income unless you keep it |
| Application fee | Fee income | Offset by the screening cost if you pass it on |
| Parking, storage, laundry | Other rental income | One account per type is easier to read |
| Late fee | Late fee income | See recording rent and late fees |
| Lease break fee | Fee income | See lease break fees |
Whether a fee is allowed at all depends on the state. Limits for application fees, pet charges and move-in fees are in rental application fee limits by state, pet deposit and pet rent limits and non-refundable move-in and cleaning fees. A fee the law does not allow must be returned, and then it was never income.
Application fees and screening costs
An application fee you keep is income. If you pay a screening company for the report, that payment is an expense. Do not net the two against each other; book the fee as income and the screening cost as an expense, so a rise in screening cost is visible.
Example a made-up owner collects $40 from each of 6 applicants, which is $240. The screening company charges $35 each, which is $210. Income is $240, expense is $210, and the net is $30 ($240 less $210). If one applicant is refunded by law, income drops by $40.
If the applicant pays the screening company directly, you collect nothing and book nothing.
Pet money is three different things
- A pet deposit you refund is a liability, held with the other deposits.
- A one-time pet fee you keep is income when received.
- Pet rent is income every month, and it adds up quickly: 4 tenants at $35 a month is $140 a month, $1,680 a year.
A service animal or emotional support animal is not a pet under fair housing rules, so a pet fee or pet rent generally cannot be charged for one. Do not set up an automatic pet charge that ignores that. Ask a local attorney if unsure.
A simple routine
- Create separate income accounts for pet rent, fees, parking and late fees. See the chart of accounts.
- Create a deposits-held account for money you must return.
- Record each payment against the tenant ledger first, so the tenant's balance and your income agree. See what to record on a tenant ledger.
- Keep a note with the fee's legal basis, such as the lease clause, in case a tenant disputes it.
How DoorKeeping handles it
DoorKeeping posts each charge and payment to the tenant's ledger and to the property's own books, with separate lines for rent, fees and deposits held, and it reads limits from the state rules table for late fees and deposits. Charges and refunds wait for your one-tap approval. The Schedule E report comes from the same ledger. Your preparer decides how each item is reported.
Sources
- IRS, Publication 527, Residential Rental Property (2025), read Oct 30, 2026
Questions
- Is an application fee rental income?
- If you keep it, generally yes. Book it as fee income and book the screening cost as a separate expense. Many states limit what you may charge.
- Is a pet deposit income?
- Not if you must return it. It is a liability held for the tenant. If you keep part of it for damage, that part becomes income or offsets the repair.
- Should pet rent and rent be in the same account?
- You can, but a separate account makes the profit and loss easier to read and shows how much pet rent brings in.