Landlords should familiarize themselves with the statewide regulations that govern security deposits in Mississippi and understand their responsibilities.
Quick Facts for Mississippi
- Maximum Amount: No statutory limits set
- Duration for Return: Within 45 days from tenancy termination
- Penalty for Late Returns: Penalty that doesn’t exceed $200, plus any actual damages
- Applying Security Deposit as Last Month’s Rent: Not advised, but can be agreed upon in writing between landlord & tenant
Tenants should expect that a landlord will ask for a security deposit when entering a lease agreement. Mississippi landlords benefits from requiring tenants to provide a security deposit before occupying the rental unit. It’s a way for landlords to have a cushion against damages that a tenant may cause. Both landlords and tenants should have an understanding of the basics of state law that governs security deposit.
Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant doing damage to the rental property, or a breach of the lease agreement, or unpaid rent. 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 secure their security deposit at the end of the tenancy agreement.
Allowable Security Deposit Charge in Mississippi
Mississippi state law doesn’t establish a statutory limit on the amount that a landlord can charge a tenant for a security deposit.
Security Deposit Rules & Regulations for Landlords in Mississippi
- Storing Security Deposit: Mississippi doesn’t have any statutes related to where security deposits should be stored, or the type of account in which it should be stored.
- Allowable Uses of the Security Deposit (§ 89-8-21(3)):
- Unpaid rent
- Cost of damages caused by the tenant, beyond ordinary wear and tear
- Cleaning cost after termination of the tenancy
- Other reasonable and necessary expenses resulting from the tenant’s default
- Applying Security Deposit as Last Month’s Rent: A security deposit is not intended to be used to cover a tenant’s last month’s rent. However, a landlord and tenant can agree in writing for the security deposit to be used as last month’s rent.
- How to Get Full Refund: 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, all charges in the rental agreement are covered and any financial loss from a breach of the contract is recovered.
Returning Security Deposits in Mississippi
- Time Frame: A Mississippi landlord should return a security deposit or any remaining portion to the tenant within forty-five (45) days after the termination of his tenancy, the delivery of possession and demand by the tenant (§ 89-8-21(3)).
- Written and itemized notice required: The landlord should provide the tenant with a written notice of his/her intent to withhold all or any portion of the security deposit. The notice should itemize the deductions and the amount charged for each deduction (§ 89-8-21(3)).
- Penalty for Failure to Comply: If the landlord retains all or a portion of the tenant’s security deposit, in bad faith, he/she will have to pay damage that doesn’t exceed $200, plus any actual damages (§ 89-8-21(4)).
“Normal Wear and Tear” vs. Damage in Mississippi
- “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.
Security Deposits and Tax Filing in Mississippi
A security deposit can either be held to cover losses suffered by the landlord or refunded to the tenant, all or in part. What 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.
The Law on Security Deposits in Mississippi
Mississippi security deposit statutes can be found in Mississippi Code Annotated § 89-8-21
Tips for Mississippi Landlords on the Right Practices for Security Deposits
- Charge tenants a reasonable amount for a security deposit in the absence of a statutory limit at the state level
- Provide tenants with an itemized list of deductions and the cost of each
- Return security deposits within 45 days of terminating the tenancy
- Withhold security deposits for unpaid rent, damages, utility and cost related to a breach of the lease agreement
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
Mississippi security deposit statutes should be embraced by landlords. They should remain in compliance and also seek to protect their assets as well. Tenants should also seek to have a knowledge of how the state’s security deposit law applies to them. It’s important to stay up-to-date on the security deposit law that can change over time.
Make sure to refer to the Mississippi Code Annotated § 89-8-21 for more on security deposits. Landlords should educate themselves on this topic to protect their rental property and avoid any legal trouble.