What should a landlord do when a tenant overpays rent: credit it or refund it?

Why overpayments happen

Most are honest. A tenant pays by autopay and then pays again by hand. A rent increase takes effect and the tenant sends the old amount plus a guess. A roommate and the tenant both pay. Or a tenant pays several months ahead because they are traveling.

Some are not. A payment larger than due followed by "please send the difference back" is a common scam, where the first payment later fails or reverses and the refund is gone. Treat unexpected large overpayments with the same care as a bounced payment.

What to do, step by step

1. Check the amount against the lease and any recent rent change. Make sure the problem is not your own mistake.
2. Confirm the payment has cleared your bank. A pending payment can still reverse.
3. Message the tenant, in writing: "We received $X, which is $Y more than the $Z due. Would you like it credited to next month or returned?"
4. Follow their answer if your lease allows it. If the lease says overpayments are credited, say so.
5. Record the extra as a credit on the tenant ledger, dated, with a note.
6. If you refund, send the money the same way it came, to the same account, and record it.

Example a made-up tenant owes $1,300 and sends $1,600 by bank transfer. After the funds clear, the tenant says to apply the extra to next month. The ledger shows rent of $1,300 paid and a $300 credit. Next month the landlord applies the credit, and the tenant owes $1,000.

How to record it without confusing the books

Money held for a future month is not yet rent for the current month. Keep it as a credit balance, a liability owed back to the tenant or applied later. When the next month comes due, apply the credit and record it as rent for that month.

For income taxes, the usual rule in IRS Publication 527 is that rent paid in advance is income in the year you receive it, so a prepayment can move income between years. If a tenant prepays across a year end, talk to your tax preparer.

Example a made-up tenant prepays January rent of $1,300 on December 28. For a cash-basis landlord, the $1,300 was received in December and is generally reported in that year. Your ledger should still show it as applying to January, so the tenant's January balance is zero.

Rules to check before you refund

• Does the lease say what happens to overpayments?
• Is the tenant behind on anything else? Many landlords apply the extra to what is owed first, if the lease and state allow it.
• Did the payment come from someone else? See the post on accepting rent from a third party before you send money back to a different person.
• Is there an open notice? Check how accepting or applying money affects it in your state.

How DoorKeeping handles it

Because each tenant has an exact amount with its own cents and a memo like 12B SMITH, an overpayment shows in the matched bank feed as a difference you can see. Ask Claude or ChatGPT to show the tenant's ledger, post the credit and draft the question to the tenant. DoorKeeping never holds rent, so any refund is sent from your own bank.

Sources

1. IRS Publication 527: Residential Rental Property (rent paid in advance), read Oct 30, 2026

Questions

Do I have to refund an overpayment?

Not always. Your lease may allow crediting it to the next month. Ask the tenant and check the lease and your state.

Is an overpayment income right away?

Rent received in advance is generally income in the year you receive it, under the usual cash-basis rule. Ask your tax preparer for your case.

What if the tenant asks me to send back the difference?

Wait until the payment has fully cleared, and refund to the account it came from. Overpayment-and-refund requests are a common scam.

Where do I record an overpayment?

As a credit on the tenant ledger, applied to the next charge, not as income for a month that has not come due.