Hi CoralCanyonHOA,
You can use Square to collect a deposit. Where you run into a challenge is doing a refund, the customer and/or owner will get their entire amount back however, on your end - the Transaction Processing Fees are your loss assuming a credit card was used. There's also another downside to consider - depending on the number of refunds that are processed can raise some red flags against your account - not a good thing. Unfortunately there's no work around as you will experience this same scenario with most credit card processing services.
Honestly, I'm not sure how deposit refunds work with other transaction processors work - for example - you purchase a canister of propane from your local grocery store, there's a deposit for the container, when you return the container, you get your deposit back. I'm not sure that Square has the same logic in place at this point. Perhaps others here have some more encouraging thoughts.
jk
