Idaho landlords and tenants should know the laws that govern the collection, handling, and return of security deposits to tenants. These laws are for the benefit of both Idaho landlords and tenants. Landlords are accountable for tenants’ security deposit and are required to comply with the established laws. Tenants should know the security deposit laws in the state and their legal rights when entering a rental agreement.
The Purpose of a Security Deposit
Idaho Stat. 6-321 states that security deposits are amounts given by a tenant to a landlord for any purpose other than the payment of rent. The purpose of a security deposit is to serve as a safety net for landlords if they suffer financial losses that may be caused by damages to the rental property, unpaid rent or other breaches of the lease agreement. A security deposit ensures that a landlord is compensated for losses and may also incentivizes tenants to adhere to their lease obligations in order to have their security deposit returned at the end of the lease term.
Allowable Security Deposit Charge
Idaho Stat. 6 -321 doesn’t establish a limit on the amount of security deposit that a landlord can charge a tenant. There is no statute related to pet deposits or non-returnable fees. Landlords are also not required to provide tenants with a receipt for the security deposit.
Security Deposit Interest Payment
Landlords are not required by law to hold the security deposit in an interest bearing account, nor in escrow, but the name of the banking institution where it is being held should be included in the lease agreement.
Idaho landlords are required to return security deposits to tenants within 21 days if there is no fixed time written in the lease agreement, and in any case, 30 days after the tenant has surrendered the rental unit.
- If any portion of the security deposit is being withheld by the landlord, a signed statement itemizing the amounts that is being withheld, the reason for the withholding and a detailed list of the charges made from the deposit should accompany the remaining security deposits (Idaho Stat. 6 -321).
Failure to Return the Security Deposit
If a Idaho landlord fails to return the deposit and provide an itemized list of damages and the charges within the required time period, the tenant has the right to take legal action against the landlord to have the deposit returned.
Allowable Deductions From Security Deposit
Landlords are allowed to only make deductions for reasons that have been established in the lease agreement and cannot deduct for normal wear and tear.
Applying Security Deposit as Last Month’s Rent
A security deposit is not intended to be used as the tenant’s last month’s rent. The security deposit is not rent money and wouldn’t simply be used to cover tenants’ last month’s rent if they vacate without paying. It’s meant to cover damages/losses.
How to Get a Full Refund of Security Deposit
At the end of the tenancy, a full security deposit can be returned to the tenant if there is no damage to the rental property, rent is paid in full and all charges in the rental agreement are covered.
Security Deposits and Tax Filing
A security deposit can either be held to cover losses suffered by the landlord or refunded to the tenant, all or in part. Depending on which happens at the end of the tenancy, determines how a security deposit is treated for tax purposes.
- Accounting for Security Deposits
Security deposits are treated as either assets or liabilities when filing taxes. It is not automatically rental income when first received. Tenants shouldn’t deduct security deposits as expenses when filing their taxes and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant at the end of the tenancy. Security deposits are not income until they become as such.
- Security Deposit Write-off
Usually, landlords cannot deduct security deposits when filing taxes as expenses before they are used for one purpose or another. If a landlord withholds part or all of the security deposit for unpaid rent, then that amount should be included as income for that year when filing taxes. Forfeited deposits should be declared as income on a landlord’s tax return. A deposit is taxable income only if and when a landlord has no obligation to refund the tenant.
“Normal Wear and Tear” vs. Damage
- Idaho Stat. 6 -321 defines “Normal wear and tear” as deterioration that occurs as a result of use for which the rental unit is intended and without negligence, carelessness, accident, or misuse or abuse of the premises or contents by the tenant or members of his household, or their invitees or guests.
It can include minor issues, such as gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass and dirty grout that occur naturally as a result of the tenant using the property as it’s designed to be used.
- “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value, normal function of the rental unit. Pet damage (heavily stained and ripped carpet), broken tiles, hole in the wall, broken windows and missing fixtures are all examples of damage.
Rental Unit Change Ownership
If the property changes ownership during the period of a tenant’s rental agreement, the new owner becomes responsible for the security deposit and returning it to the tenant. It is also possible for the current landlord to refund the security deposit if the transaction occurs at the end of the tenancy.
The Law on Security Deposits in Idaho
Idaho’s security deposit law is found in Idaho Stats. 6-321.
Tips for Idaho Landlords on the Right Practices for Security Deposits
- Charge a reasonable amount for security deposits since there are no established statutory limits
- Return security deposits within 21 days if there is no fixed time written in the lease agreement, and in any case, 30 days after the tenant has surrendered the rental unit
- Avoid legal action from the tenant by returning the security deposit at the required time, along with an itemized list of deductions
- Withhold security deposits for any financial losses, damage or other expenses
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
Getting into a lease agreement in Idaho requires a tenant to pay a security deposit. It’s a part of the process, and it’s beneficial for both landlords and tenants. Having some useful knowledge of Idaho’s security deposit laws can protect landlords and their assets. Tenants can protect their rights as well. It’s best to periodically check the state’s security deposit laws because they can change.