- Standard Limit / Maximum Amount: 2 months’ rent (read more)
- What Can Be Deducted: Unpaid rent and cost of damage to the unit (read more)
- Time Limit for Return: 14 days if notice of termination was given, 30 days if there was no notice or if there are deductions (read more)
- Penalty if Not Returned on Time: Up to 2 times the amount withheld (read more)
Purpose. Security deposits are like safety nets. They ensure compensation for any loss that the landlord might incur because of the tenant’s acts. It covers for incidents like damage to the property, termination of the lease without notice or non-payment of rent.
Legal Basics. Alaska landlords can demand a maximum of two months’ rent (three months’ if the tenant has a pet) as security deposit from which unpaid rent and cost of damages incurred may be deducted. However, the limit doesn’t apply if the monthly rent is more than $2,000. It must be returned within 14 days if there was a notice of termination, or 30 days if there was no such notice or if there are deductions. Otherwise, the landlord may be made to pay a penalty of up to double the deposit.
Maximum Security Deposit Charge in Alaska
In Alaska, landlords cannot charge a tenant security deposit that is more than two months’ rent. However, if the monthly rent is more than $2,000, this limit and the other rules we will discuss below will not apply.
Additional Pet Deposit
As an exception to the limit on security deposits, the landlord may charge an additional deposit of up to one month’s rent if the tenant will have a pet on the premises. This additional pet deposit can only be charged if the pet is not a service animal. It must be accounted for separately from the tenant’s security deposit and may only be used to pay for damage that is directly related to or caused by the pet.
Security Deposit Holdings in Alaska
The landlord is not required to pay interest on security deposits. However, the landlord is required to put security deposits in a separate account. The account can be a trust account in a bank, savings and loan association, or a licensed escrow agent. The landlord does not need to have a separate account for each tenant who gives a security deposit. Security deposits from different tenants may be kept in the same account for as long as that account only holds security deposits and prepaid rent. What the landlord can’t do is put it in the same account where other funds like the rental income or personal savings are kept. Also, the landlord must inform the tenant of how the latter’s security deposit is being kept and the conditions under which the same may be withheld.
Landlords must account for each tenant’s security deposit separately even if they are in the same account. That means one tenant’s security deposit cannot be used to refund another tenant’s security deposit, to cover for another tenant’s rent, or to pay for damage chargeable to a different tenant.
Allowable Deductions on Security Deposits in Alaska
The landlord can only use the security deposit when the lease or tenancy has ended or has been terminated. Also, the landlord can only use the security deposit to cover:
- The unpaid rent; and
- The cost of damage caused by the tenant’s failure to comply with obligations as a tenant.
To clarify, the landlord is not always allowed to use the security deposit to cover repairs for damage caused by the tenant. Two things must be met before the landlord may do so:
- The damage must not be due to normal wear and tear (read more);
- The cause of the damage must be the tenant’s failure to comply with obligations under the Alaska Statutes (read more).
Can the deposit be used by the tenant as last month’s rent? Not usually, but it can be done if there is a written agreement between the parties to do so.
“Normal Wear and Tear” vs. Damage in Alaska
- “Normal wear and tear” refers to the deterioration of the property that happens when the property is used as it was meant to be used and only when that deterioration occurs without negligence, carelessness, accident, misuse, or abuse by the tenant or the people the tenant brings there. They are minor issues that occur naturally like aging and expected decline as a result of everyday living. These can include gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass, dirty grout and mold that occur naturally.
- “Damage,” on the other hand, is deterioration or destruction that is the tenant’s fault, either through deliberate acts or as a result of negligence during the tenancy period. With respect to those chargeable to security deposits in Alaska, it refers to the damage that resulted from non-compliance with any of the tenant’s obligations as such under the law. (read more on tenant’s obligations).
Check out our article on wear and tear vs. damage to get a better idea of the difference.
The landlord can only charge the cost of repairs if the damage was caused by the failure of the tenant to comply with specific obligations. To comply with positive obligations under the said rule, the tenant must:
- Keep the premises, including all plumbing fixtures, clean and safe;
- Dispose of garbage and other waste in a clean and safe manner;
- Use all facilities (e.g. electrical, plumbing, heating, etc.) and appliances reasonably;
- Maintain smoke detection and/or carbon monoxide detection devices;
- Comply with the maximum number of persons allowed to occupy the premises; and
- Leave the premises in the same condition it was in when it was handed to the tenant.
The rest of the tenant’s obligations under the same law consist of not doing some things, specifically those enumerated below. The tenant must not:
- Change the locks on doors on the premises, except if necessary in an emergency;
- Engage in unreasonable conduct that will cause members of the municipal police department to check on the premises enough times in a year to warrant the imposition of fees for excessive use or necessity of Police Protection Services under Section 29.35.125 of the Alaska Statutes;
- Destroy, damage, or remove parts of the premises;
- Unreasonably disturb the neighbor’s peaceful enjoyment of the premises; and
- Engage in illegal activities involving prostitution, gambling, use of alcohol or controlled or prohibited substances, and other similar or illegal activities, or in activities promoting the same within the premises.
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit.
Returning Security Deposits in Alaska
Time Frame: If the lease is terminated by the landlord or tenant through a proper notice and there are no deductions on the security deposit, the landlord has 14 days to return it. The 14 days are counted from the date stated specified in the notice as the end of the lease.
However, if the tenant does not give proper notice or if there are deductions on the security deposit, the landlord has 30 days to return the same. The 30 days may be counted from the termination of the lease, the date the tenant gives the premises back or the date the landlord finds out that the tenant has abandoned the premises, whichever is earlier. The landlord is required to exert reasonable efforts to return the security deposit.
Also, if there are deductions on the security deposit, the landlord is required to inform the tenant of the specifics of the same in an itemized list on a written notice to be mailed to the tenant together with the remaining amount to be returned within the same timeframe.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit within the 14 or 30 days, the tenant stands to recover up to double the amount the landlord owes is withholding. That means a tenant who has also given pet deposit can possibly recover up to 6 months’ worth of rent if the landlord fails to return the deposit on time.
Security Deposits and Tax Filing in Alaska
How the security deposit will be treated tax-wise depends on whether or not the landlord gets to keep it (or part of it).
Taxable income: Security deposits are not automatically considered income when the landlord receives them. The IRS advises to not include security deposits as income if the landlord may still be required to return the same. They only become taxable income when the landlord no longer has any obligation to refund them. For example, if the security deposit was given in 2019 but was only forfeited in 2020, then the landlord should only include it as income in 2020.
Reporting security deposit as income: Whether or not security deposit should be reported as income and when to do so will depend on what it is being applied to or used as. Below are 3 simple rules the IRS has suggested to follow:
- If the deposit is forfeited due to a breach of the lease or applied to unpaid rent, then the amount kept should be declared as income in the year it was forfeited or applied.
- If the security deposit is used to cover expenses that are chargeable to it, then the landlord should only include the part of the deposit used as income if the landlord includes the cost of repairs as expenses. If the landlord doesn’t include them as expenses as a matter of practice, then there’s no need to include the part of the deposit kept to cover them as income.
- If there is an agreement between the parties to use the deposit or part of it as the final month’s rent, then the landlord should include it as income when the same is received.
Additional Rules & Regulations in Alaska
Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in Alaska.
Security Deposit Interest in Alaska: Alaska laws require security deposits to be deposited into a separate account but the landlord is not required to pay interest on them.
New Property Owner’s Responsibility: If the rental property is sold while the lease subsists, the buyer inherits the previous owner’s obligation to refund the tenant’s security deposit when the lease ends. Therefore, the buyer should make sure to procure the security deposit and the proper accounting for the same from the previous owner.
Frequently Asked Questions
How much can a landlord charge for a security deposit in Alaska?
The maximum security deposit a landlord can charge in Alaska is 2 months’ rent. If the tenant has a pet, the landlord may charge an additional pet deposit of up to 1 month’s rent on top of the security deposit.
Can you use the security deposit as last month’s rent in Alaska?
In Alaska, a tenant is not usually allowed to use the security deposit as last month’s rent. However, if there is an agreement between the landlord and the tenant to use the security deposit for last month’s rent, then the tenant can do so.
What can a landlord deduct from a security deposit in Alaska?
A landlord in Alaska can legally deduct the following from the security deposit: unpaid rent and the cost of damage caused by the tenant’s noncompliance with obligations as a tenant.
Can a landlord charge a cleaning fee in Alaska?
In Alaska, a landlord is allowed to charge a cleaning fee but only insofar as necessary to bring the unit to the state it was in when the tenant moved in. Beyond that, the landlord can only charge cleaning costs against the security deposit if the rental agreement allows doing so.
What is considered normal wear and tear in Alaska?
Normal wear and tear in Alaska is defined as deterioration that occurs from the intended use of the rental unit and without negligence, carelessness, accident, misuse, or abuse of the premises or contents by the tenant, members of the household of the tenant, or the invitees or guests of the tenant.
How long does a landlord have to return the security deposit in Alaska?
In Alaska, a landlord has 14 days from the move out date to return the security deposit or 30 days after if the lease was terminated by the tenant without providing the required notice.
The 30 days may be counted from the termination of the lease, the date the tenant gives the premises back or the date the landlord finds out that the tenant has abandoned the premises, whichever is the earliest.
What happens if a landlord does not return the security deposit in Alaska?
If a landlord in Alaska does not return the security deposit within 14 days from the move out date or 30 days after termination, the landlord loses the right to make any deductions and may be liable for a penalty of double the amount of the security deposit.
Are security deposits taxable in Alaska?
Security deposits in Alaska aren’t taxable until they become the landlord’s property. This happens when the security deposit is applied to rent, forfeited, or applied to charges allowed under the lease.
However, when they are used to cover expenses incurred by the landlord due to the tenant’s fault, like the cost of repairs or unpaid utilities, they are not always taxable. The IRS advises to only report them as income if the landlord also reports the costs they covered as expenses. Otherwise, there is no need to report them as income, in which case they will not be taxed.