In Ohio, the collection and return of security deposits are primarily regulated under Ohio Revised Code § 5321.16. These laws provide a set of rules that Ohio landlords and property managers have to follow to protect all parties.
Maximum Security Deposit Charge in Ohio
There is no limit on the amount that Ohio landlords can charge as a security deposit. Note, although at the state level there is no statutory limit on security deposits, city and county laws may have a set cap on security deposits for residential units.
Additional Pet Deposits. Under Ohio’s law, the landlord may ask for an additional pet deposit; however, people with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.
The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.
Allowable Deductions on Security Deposits in Ohio
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:
- The unpaid rent.
- The cost of damage caused by the tenant’s failure to comply with obligations as a tenant.
To clarify, the landlord is not always allowed to use the security deposit to cover repairs for damage caused by the tenant. Two things must be met before the landlord may do so:
- The damage must not be due to normal wear and tear (read more).
- The cause of the damage must be the tenant’s failure to comply with obligations under the Ohio Code. (read more)
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.
“Normal Wear and Tear” vs. Damage in Ohio
- “Normal Wear and Tear” refers to the deterioration of the property that happens when the property is used as it was meant to be used and 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, dirty grout and mold that occur naturally.
- “Damage” refers to the destruction that occurs because of abuse or negligence by a tenant during 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.
Check out our article on wear and tear vs. damage to get a better idea of the difference.
The landlord can only charge the cost of repairs if the damage was caused by the failure of the tenant to comply with specific obligations. To comply, the tenant must:
- Keep the premises, including all plumbing fixtures, clean and safe.
- Comply with any building, health, housing, or safety codes.
- Dispose of garbage and other waste in a clean and safe manner.
- Use and operate all electrical and plumbing fixtures properly.
- Comply with rules and regulations of applicable building, housing or fire codes on health and safety.
- Maintain in good working order and condition any and all appliances (e.g., refrigerator, washer, dryer, dishwasher, etc.) supplied by the landlord.
The tenant must not:
- Negligently or deliberately destroy, damage, or remove fixtures or parts of the premises.
- Disturb the neighbor’s peaceful enjoyment of the premises.
- Engage in illegal activities within the premises.
- Unreasonably withhold consent for the landlord to enter into the unit when the landlord has a valid reason to do so (e.g., to make necessary or agreed repairs, decorations, improvements or alterations, etc.).
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit.
Returning Security Deposits in Ohio
Time Frame: The landlord has 30 days to return the security deposit, or what’s left of it, to the tenant. The 30 days start counting from the day both of the two conditions below happen:
- The lease has terminated.
- The unit has been surrendered to the landlord by the tenant.
Where deductions have been made from the security deposit, the landlord is required to provide the tenant a written notice with an itemized list of all the deductions. The tenant must provide the landlord with a forwarding address to which the landlord must mail all abovementioned items and documents. If the tenant fails to provide the landlord with a forwarding address, the tenant shall forfeit their right to pursue any legal action against the landlord’s nonpayment of the security deposit.
Failure to Return the Security Deposit on Time: If the landlord fails to return the security deposit or what’s left of it with the required written notice, the landlord may recover the security deposit and pay a penalty equal to the amount withheld plus reasonable attorney’s fees. Tenant’s may sue up to $3,000 in Ohio’s Small Claims Court.
Security Deposits and Tax Filing in Ohio
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 2020 but was only forfeited in 2021, then the landlord should only include it as income in 2021.
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 three simple rules the IRS has suggested:
- 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.
- 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 Ohio
Failure of the Tenant to Provide a Forwarding Address: It is the tenant’s responsibility to provide a forwarding address to where the landlord may return the security deposit. If the tenant fails to do so, the landlord will not be held liable for the penalty for not returning the security deposit on time.
Interest Payments: Ohio landlords are not always required to pay interest on security deposits received. Landlords who charge security deposits that are more than $50 or one month’s rent (whichever is greater) are required to pay interest on security deposits of tenants who stay for six months or more. When required, the landlords must pay 5% yearly interest on the excess of the security deposit collected over the greater of $50 or one month’s rent.
For additional questions about security deposits in Ohio, please refer to the official state legislation, Ohio Revised Code § 5321.16, for more information.