Thanks for your replies. The forfeited earnest money is Ordinary income. The question then becomes is it Passive income and report on Sch E as rental income. There is no Other Income labeled line in Sch E. Or report in Sch 1. If I report as rental income, then there are enough expenses that no deposit will be taxed. If I report as Other Income, sch 1, no rental losses can negate the forfeited deposit since the owner does not actively participate. Thoughts? I have looked at AI and I get varied results.