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As long as you never said the deposit was refundable, the money is yours, even if it isn't the entire amount. Just asked my dad (he used to have a bunch of rental houses) and this was his answer. He's been to court over things with tenants before where the question of the deposit comes up, and he said invariably the court has ruled it to be his. For future you may want to get something written up (even if you just do it by hand) expressing the amount you receive and the fact that it is under no circumstances refundable (provided you are consistent with whatever agreement that necessitated the cash exchange)
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