Iowa Security Deposit Collections & Holdings

Iowa Security Deposit Collections & Holdings

Last Updated: February 27, 2023 by Ashley Porter

Quick Facts Answer
Maximum / Limit 2 Months’ Rent
Receipt Requirement None
Inventory Requirement None
Interest Requirement Usually None

To learn about laws on security deposit returns in Iowa, click here.

Maximum Security Deposit Allowed in Iowa

Iowa law limits the maximum security deposit to two months’ rent.

Can Landlords Charge an Additional Pet Deposit in Iowa?

Yes, landlords can collect an additional pet deposit in Iowa, except for service dogs and emotional support animals. However, the total security deposit cannot exceed two months’ rent. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit”.

This law does not prevent landlords from adding a monthly pet premium.

How Much Rent Can a Landlord Collect Upfront in Iowa?

There is no limit on the amount of rent that can be collected upfront in Iowa. Many states have a limit on the amount of rent that can be collected at once, but Iowa does not.

Security Deposit Collections in Iowa

While other states have additional requirements for landlords that collect a security deposit, such as providing certain documentation of the condition of the unit at move-in, Iowa does not.

Do Landlords Have to Provide a Receipt for the Security Deposit in Iowa?

Although some states like Washington require a receipt, landlords are not required to provide a receipt for the security deposit in Iowa.

What Obligations Do Landlords Have to Establish the Condition at Move-in in Iowa?

Iowa law does not require landlords to document or establish the property’s condition at move-in. While other states legally require a written inventory of damages to be completed when collecting a security deposit, Iowa does not.

Security Deposit Holdings in Iowa

Landlords in Iowa must hold security deposits in a trust account or a federally-insured bank, credit union, or savings and loan association. Security deposits cannot be commingled with the landlord’s own funds.

Are Tenants Entitled to Interest on Their Security Deposit in Iowa?

Landlords in Iowa are not required to hold security deposits in interest-bearing accounts. If they choose to do so, the interest that accrues during the first five years of the tenancy belongs to the landlord.

If a security deposit is held in an interest-bearing account for more than five years, any interest that accrues during the sixth and later years belongs to the tenant.

How Are Security Deposits Accounted for in Iowa?

Security deposits are not considered taxable income when they are collected.

What Happens to a Security Deposit When the Property is Sold in Iowa?

When a property is sold in Iowa, the landlord must (within a reasonable time) either:

  • Transfer the security deposit to the new owner and notify the tenant in writing; or
  • Return the security deposit to the tenant

In either case, the original landlord can make any allowed deductions first. If they make deductions and transfer the deposit to the new owner, they must notify the tenant in writing of the amount transferred (after deductions) and the new owner’s name and address.

The notice must include a stamped envelope addressed to the new owner. If the tenant does not object to the amount within 20 days, the new owner is only liable to the tenant for the amount transferred.