- Standard Limit / Maximum Amount: No Limit (read more)
- What Can Be Deducted: Unpaid rent, cost of repairs & charges specified in the lease
- Time Limit for Return: 45 days from the date the tenant vacates the premises, 30 days if there are deductions (read more)
- Penalty if Not Returned on Time: 2 times the security deposit, costs of suit & attorney’s fees (read more)
- Interest Rate: 0.01% when required (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. Illinois laws do not put a limit on the amount that can be charged as security deposit from which unpaid rent, cost of repairs and charges specified in the lease may be deducted. The landlord has 30 days to provide an itemized statement of charges on the security deposit or return the same in full within 45 days. Otherwise, the landlord may be made to pay a penalty of up to double the deposit plus costs of suit and attorney’s fees.
Maximum Security Deposit Charge in Illinois
Illinois does not have a statutory limit on security deposit charges at the state level.
Allowable Deductions on Security Deposits in Illinois
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:
- Unpaid rent
- Cost of repairs for damage to the unit
- Costs and charges specified in the lease
Illinois law specifically provides that the charges provided for in the lease must be for the repairs for damage that is beyond normal wear and tear and for the restoration of the unit to the condition it was in before the tenant moved in.
“Normal Wear and Tear” vs. Damage in Illinois
- “Normal wear and tear” refers to deterioration of the property that happens when the property is used as it was meant to be used but 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, and dirty grout.
- “Damage,” on the other hand, refers to the destruction that occurs because of abuse or negligence by the tenant during the tenancy. It diminishes the usefulness, value, or normal function of the rental unit. Some examples are pet damage (heavily stained and ripped carpet), broken tiles, holes in the wall, broken windows and missing fixtures.
Check out our article on wear and tear vs. damage to get a better idea of the difference.
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.
Returning Security Deposits in Illinois
Time Frame: The landlord has 45 days from the day the tenant vacates the premises to return the security deposit if there are no deductions. The landlord can do this personally or via postmarked mail to the tenant’s last known address or the forwarding address provided by the same.
If there are deductions to be made on the security deposit, the landlord has 30 days from the day the tenant vacates the premises to provide the tenant with an itemized statement of damage and the cost of corresponding repairs. The landlord may deliver this list personally, by postmark mail to the last known address of the tenant, or a verified e-mail provided by the same.
Itemized Statement of Costs: The costs listed on the itemized statement can be specified and justified as follows:
- Where actual costs are paid, the landlord must specify the damage repaired and include the receipts or copies of the receipts therefor.
- Where the restoration or repairs will be done by the landlord or the landlord’s employees, a reasonable cost for the same may be included in the list in lieu of actual costs and receipts.
- Where the landlord is only able to provide an estimate of the cost within the time frame, the landlord can include reasonable estimates of the cost but must provide the tenant with the receipts or copies thereof within 30 days of providing the itemized statement.
- Where the deductions are charges that are specific amounts provided for in the lease, the landlord can include a copy of the portions of the lease agreement referencing those charges in lieu of receipts.
- Where the landlord is not able to provide the receipts or copies of receipts as required and this inability is not due to the landlord’s fault, the landlord may provide whatever evidence the landlord has of having paid the costs and a sworn statement detailing the reason for the lack of receipts.
Exceptions: Note, however, that these rules and the penalties below only apply to rental agreements over residential properties with 5 or more units for rent. Otherwise, there is no specific time frame provided at the state level.
Failure to Return the Security Deposit on Time: If the landlord does not provide the itemized statement within the 30 days allowed, the landlord must return the security deposit in full within the 45 days. If the landlord fails to do so and the landlord is found to have acted in bad faith (i.e. did not have good reason to hold on to the security deposit) the landlord may be liable for twice the security deposit plus costs of suit and attorney’s fees.
Security Deposits and Tax Filing in Illinois
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 Illinois
Interest Payments: Illinois landlords are not always required to pay interest on security deposits. The landlords are only required to do so with respect to security deposits pertaining to tenants of a property that has 25 or more units (either in one building or in a complex of buildings). The interest minimum interest rate to be paid by the landlord is equal to the interest rate that the biggest commercial bank. Currently, that rate is .01%.
When the landlord is required to pay interest (as mentioned above), the landlord pays interest on security deposits that have been with the landlord for at least 6 months. Any interest that is $5 or more must be paid to the tenant or credited to the tenant’s rent within 30 days after the end of every 12 months. At the end of the lease, all the interest earned that has not been paid or credited must be paid to the tenant regardless of the amount. Failure to pay or credit interest as discussed above may make the landlord liable for penalty equal to the security deposit plus costs of suit and attorney’s fees.
New Property Owner’s Responsibility: If the leased property is sold during the term of the lease, the new owner will become liable for the security deposit. However, the old landlord will remain jointly and severally liable for the same until the old landlord transfers the security deposit and the name and address of the tenant to whom the security deposit pertains.
Upon receiving the security deposit and the details of the tenant, the new owner has 21 days to post a written notice on the main entrance of each unit stating that the new owner has acquired the same and received the corresponding security deposits.
Frequently Asked Questions
How much can a landlord charge for a security deposit in Illinois?
There is no maximum security deposit a landlord can charge in Illinois. Illinois law on security deposits does not currently put a limit on the amount of security deposit. However, counties and cities can impose a limit, so it is best to check the local ordinances to be sure.
Can you use the security deposit as last month’s rent in Illinois?
In Illinois, 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 Illinois?
A landlord in Illinois can legally deduct the following from the security deposit: unpaid rent, damage to the unit, and charges specified in the lease.
However, repairs and restorations are not chargeable against the security deposit if they are for that damage was caused by normal wear and tear, or existed before the tenant moved in.
Can a landlord charge a cleaning fee in Illinois?
In Illinois, 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 Illinois?
Normal wear and tear in Illinois is defined as a matter of case law or practice. The statutes do not specifically provide a definition but generally, it is deterioration that occurs naturally as a result of the tenant using the property as it’s designed to be used without fault or negligence from the tenant.
How long does a landlord have to return the security deposit in Illinois?
In Illinois, a landlord has 45 days from the move out date to return the security deposit. However, if the landlord intends to make deductions on the security deposit, the landlord must provide the tenant with the written statement of charges within 30 days of the move out date.
If the landlord fails to provide the written statement within the 30 days, the landlord forfeits the right to make deductions and must return the full security deposit within 45 days from the move out date as if there were no allowable deductions.
What happens if a landlord does not return the security deposit in Illinois?
If a landlord in Illinois does not return the security deposit within 45 days from the move out date, the landlord loses the right to make any deductions and may be liable for a penalty of double the amount withheld, costs of suit and attorney’s fees.
Are security deposits taxable in Illinois?
Security deposits in Illinois 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.
For additional questions about security deposits in Illinois, please refer to the official state legislature, Illinois Compiled Statutes § 710/1 to § 710/2 and § 715/1 to § 715/3, for more information.