Indiana’s security deposit law provides clear guidance for landlords seeking to avoid costly mistakes such as missed return deadlines, improper deductions, and unnecessary disputes over damages.
This guide breaks down all these regulations in plain language and shows how they apply in real-world rental situations. Here, you’ll learn how much landlords can collect for a security deposit, how they must handle and store deposits, whether interest is required, what deductions are legally allowed, when and how deposits must be returned, how disputes are resolved, and more.
Statutes Regulating Indiana Security Deposits
Indiana’s security deposit laws are found in Chapter 3 of Article 31 of the Indiana Code and govern how landlords collect, hold, deduct from, and return deposits.
Some cities and counties may have regulations that are more restrictive than those presented here. Always check local laws before collecting a security deposit.
Maximum Security Deposit Amounts Under Indiana Law
| Quick Facts | Answer |
| Maximum / Limit | No Limit |
| Receipt Requirement | None |
| Inventory Requirement | None |
| Interest Requirement | None |
Indiana law sets no limit on security deposit amounts, so landlords choose a deposit that fits the rental and the risks involved. This flexibility applies to all lease types and contract lengths, giving property owners the ability to set terms that match their management style.
Indiana offers no exceptions or special maximums to this rule.
Security Deposit Storage Regulations
Indiana law does not require landlords to use a specific account or issue receipts for security deposits. State regulations treat the deposit as the tenant’s property until lawful deductions apply, giving landlords flexibility to store these funds as they see fit.
Security Deposit Interest in Indiana
Indiana law does not require landlords to place security deposits in interest-bearing accounts, nor will landlords ever owe tenants interest on these funds.
Making Security Deposit Deductions
Security deposit deductions help landlords protect the long-term condition of a rental property by covering damage beyond ordinary wear and tear. When tenants don’t pay rent or cause damage that exceeds normal wear and tear, landlords rely on these funds to cover the expenses.
When Landlords Can Deduct
Indiana landlords may draw from a tenant’s security deposit for the following reasons:
- Repairing damage that exceeds normal wear and tear under Indiana law
- Covering unpaid rent that builds up during the lease term
- Paying utility bills left outstanding after move-out
- Handling costs that result from an early lease termination
- Resolving documented financial losses caused by lease violations
When Landlords Can’t Deduct
Indiana landlords may not draw from a tenant’s security deposit for the following reasons:
- Addressing normal wear and tear that occurs through everyday use
- Charging for routine cleaning unrelated to tenant-caused damage
- Covering improvements made to upgrade the rental rather than restore it
- Applying fees that the lease does not authorize
- Charging for conditions documented at move-in as preexisting
Necessary Documentation to Accompany Deductions
Indiana law does not require landlords to give tenants receipts, invoices, or other documents when making security deposit deductions. Landlords may still choose to provide these records, but state rules do not obligate them to provide any supporting paperwork.
What to Do When Deductions are Greater Than the Deposit
When damage exceeds the security deposit, Indiana landlords typically request the remaining balance directly from the former tenant. When doing so, landlords should reach out in writing or make a formal demand to recover the funds. State law sets no specific timeframe for pursuing these additional costs after move-out.
Landlords who cannot collect the remaining balance can file a claim in Indiana’s small claims court or pursue the debt through a collections agency.
Returning Security Deposits to Tenants
Indiana law outlines how landlords must return any remaining portion of a tenant’s security deposit after lawful deductions, creating a clear path forward for everyone involved.
Required Timeline for Return
Indiana landlords must return the remaining deposit or send an itemized deduction list within 45 days after the tenant moves out and provides a forwarding address. The 45-day clock starts on the day the tenant vacates.
Method for Return
Indiana law requires landlords to mail the deposit and any itemized deduction list to the tenant’s forwarding address. State rules do not mandate a specific payment method, so landlords may return funds by check, electronic payment, or another reasonable option (as long as they include the required notice and balance within 45 days).
Penalties for Late Return
If a landlord misses the 45-day deadline or fails to send the itemized statement, Indiana law voids the landlord’s right to keep any part of the deposit. A tenant may sue to recover the full amount and may also recover attorney fees if the court rules in their favor.
Security Deposit Disputes
When tenants disagree with how a landlord handles a security deposit, they have the right to raise a dispute. Tenants should start by putting all concerns in writing, asking for clarification, negotiating, or seeking mediation or court help if direct communication doesn’t work.
Landlords should use move-in and move-out checklist procedures, stay current with accounting and bookkeeping, and include clear terms within a lease agreement. Strong documentation, careful recordkeeping, a solid understanding of Indiana law, and strict adherence to return timelines will help you prepare for any deposit-related issues.
Using Condition Reports to Document Damage
Managing security deposits in Indiana becomes much easier when landlords use digital condition reports to help document a property’s condition at key stages, reduce disagreements, and make decisions with confidence.
To streamline the process, use property management software to create digital reports with photos and videos directly from a smartphone.
Sign up for a free TurboTenant account to collect deposits, track property damages, and keep your accounting dialed in from here on out.
FAQs: Indiana Security Deposit Law
Can a landlord deduct painting from a security deposit in Indiana?
Indiana landlords may deduct painting costs only when a tenant leaves damage that goes beyond normal wear and tear, such as heavy markings or unauthorized colors. Routine repainting that occurs during turnover does not qualify for a deduction.
Are nail holes considered normal wear and tear in Indiana?
Small nail holes from standard picture hanging generally qualify as normal wear and tear in Indiana. Landlords may deduct only when nail holes appear large or excessive, or when they cause damage that clearly exceeds ordinary use.
Who has to pay for carpet cleaning in Indiana, the landlord or the tenant?
Routine carpet cleaning usually falls under normal wear and tear, so landlords cannot charge tenants for it. When tenants leave deep stains, heavy dirt, or apparent damage behind, landlords may deduct the cost of cleaning or replacement.
What happens if a landlord doesn’t return a security deposit within 45 days in Indiana?
If an Indiana landlord misses the 45-day deadline to return the deposit or send the itemized deduction list, state law nullifies the landlord’s right to keep any portion of the deposit. Tenants may also pursue the full amount in court and recover attorney fees if they win.
