Security Deposit Law

Security Deposits

Security deposits are used to ensure a landlord is compensated, at least in part, for any loss that the tenant is responsible for, such as unpaid rent or property damage above normal wear and tear. It’s a fixed amount that the tenant gives the landlord for the latter to hold but cannot spend except for specific purposes.

Each state has its own rules for various aspects governing the collection, holding and return of security deposit funds. Use the below links to find the laws in a specific state or scroll further down this page for a summary of state laws by legal area.

Maximum Security Deposit

Most states set a limit on the amount of security deposit landlord can collect but there are some that don’t. Local government units are can security deposit limits within their respective territories as well.

In some states, the limit on security deposit only apply to certain rentals like if the landlord has “x” amount of rental units, or if the unit has a term of more than 1 year. Also, the applicable limit may differ depending on certain factors like age, whether the rental unit is furnished or unfurnished, changes to the premises, or increased liability risks to the landlord or premises.  and even the number of rental properties the landlord owns.

Note: the below table only addresses state laws. Always check with county or city housing codes for additional requirements.

Allowable Deductions on Security Deposit

The security deposit does not automatically become the landlord’s property. They are merely held by the landlords in trust, to be used only when the law allows and only for the purposes allowed deductions.

States vary greatly on what exactly can be deducted from a security deposit at the end of a tenancy. The most common reasons for deductions are unpaid rent and damages to the premise beyond “ordinary wear and tear”, but some states allow for deductions for a variety of other reasons.

Note: the below table only addresses state laws. Always check with county or city housing codes for additional requirements.

“Normal Wear and Tear” vs. Damage in

• “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,” on the other hand, is deterioration or destruction that is the tenant’s fault, either through deliberate acts or as a result of negligence during the tenancy period.

Check out our article on wear and tear vs. damage to get a better idea of the difference.

Time Frame for Returning Security Deposits

All states set specific deadlines for landlords to return security deposits to a departing tenant in a timely manner. The average deadline for return across all states is about 30 days from the commencement of the tenancy, but some states allow for as many as 60, or in rare cases, as few as 5.

Note, that whenever the landlord is allowed to make deductions from the security deposit, the landlord is required to provide the tenant with an itemized list of those deductions and deliver the what’s left of the security within on a specific period or within the same timeframe as the landlord has for returning the security deposit. Below is a table of the relevant timeframes per state.

Note: the below table only addresses state laws. Always check with county or city housing codes for additional requirements.

Frequently Asked Questions

How much can a landlord charge for a security deposit?

The maximum amount of security deposit a landlord can charge will vary depending on the state. Most states set a limit on the amount of security deposit, the most common is 1 months’ rent. Also, some states like Alaska, Delaware and North Carolina allow an additional “pet deposit” in cases where the tenant has a pet.

What Can Be Deducted From a Security Deposit?

Unpaid rent and cost of repairs for damage to the unit that is beyond normal wear and tear can usually be deducted from the rent. Depending on the state, the landlord may be allowed a few more items for deductions such as late payment fee, abandonment charges, cleaning costs, storage fees and compensation for losses incurred by the tenant due to the tenant’s breach. These allowable deductions can be found in the security deposit laws of each state.

Can you use the security deposit as last month’s rent?

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.

Can the Landlord Keep the Security Deposit?

Yes, a landlord can keep the security deposit to cover the allowable deductions. For example, the landlord may be able to keep the entire security deposit if the security deposit is equal to or less than the amount of rent owed by the tenant or if the cost of repairs.

How Long Until I Get My Security Deposit Back?

All of the states provide a definite period within which the deposit must be returned, except for New York where in the landlord must return the same “within a reasonable time.” The average deadline for return is about 30 days from the commencement of the tenancy, but some states allow the landlord as many as 60, or in rare cases, as few as 5 days to return.

What happens if a landlord does not return the security deposit?

State laws provide for penalties for if the landlord fails or refuses to return the security deposit within the time allowed. The usual penalty is losing the right to make any deductions on the security deposit and paying a multiple of the security deposit, sometimes double, sometimes three times the security deposit. Some states add attorney’s fees and costs of suit as part of the penalty.

Can I Sue My Landlord for Not Returning My Deposit?

Yes, landlords may be sued for failure to return the security deposit. In fact, some state laws even specifically state that if the landlord loses in such a suit, the landlord may be liable for damages, attorney’s fees and court costs. However, in almost all cases, the tenant must make a prior official demand for the security deposit from the landlord before filing the suit. So the first recourse should always be asking for the return of the same directly from the landlord.

What Is the Average Security Deposit?

The average security deposit is equal to one month’s rent. Some states limit the amount that a landlord can charge for a security deposit, while others do not. Some local municipalities establish limits on security deposits even if there is no statutory limit at the state level.

Can I Get My Deposit Back If I Haven’t Signed a Lease?

Yes, security deposits are generally refundable. Some state laws even specifically say that security deposits cannot be made non-refundable. Also, most states that allow non-refundable security deposits usually require that the agreement or consent to the security deposit being non-refundable should be in writing otherwise it is considered refundable. However, recovering the security deposit without a written agreement may be challenging because of the need to prove payment and the fact that the specific amount was paid as security deposit, not as rent or some other non-refundable fee.

Can Security Deposits Be Non-Refundable?

Yes, security deposits can be non-refundable but this is the exception. Security deposits are usually refundable. In most instances where it is allowed to be non-refundable, a written contract or agreement that states that the tenant agrees that the security deposit is non-refundable is required.

Should You Pay a Security Deposit Before Signing a Lease?

No, you shouldn’t pay a security deposit before signing a lease. The best option is to pay the deposit at the signing of the lease. The tenant should ensure that the lease terms are acceptable before handing over a deposit.

Do Security Deposits Earn Interest?

They do in some states. In most states, security deposits do not earn interest. However, there are some states where landlords are required to place the security deposit in an interest-bearing account or give them the option to do so. Whenever placed in an interest-bearing account, the interest earned accrues to the tenant.

Is a Security Deposit Mandatory?

No, a security deposit is not mandatory by law. Landlords are allowed to charge security deposits but are not required to do so. They can choose not to charge one. However, whenever the landlords do charge a security deposit as allowed by law, the tenant will have to pay it. The landlord can neither be penalized for charging a security deposit or be forced to waive the same.

What Can I Do If My Landlord Doesn’t Return My Security Deposit?

First is to make an official demand for it from the landlord in writing. If the landlord still does not comply, then the tenant may file a claim in small claims court to collect (or hire an attorney to do so). Note, however, that some states put a deadline on until when a tenant can claim the security deposit.

Can a Landlord Deduct Painting From a Security Deposit?

Yes, a landlord can deduct painting from a security deposit if the tenant changed the wall color after moving in and did not restore the original color before moving out. Apart wear and tear, a tenant should turn over the rental property in the same condition that it was originally received.

Are security deposits taxable?

Security deposits 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.

What Is the Difference Between a Security Deposit and a Damage Deposit?

The security deposit refers to any advance of money used to secure the performance of a lease agreement it may be used to cover unpaid rent, unpaid utilities or even be forfeited for early termination if the lease agreement allows doing so. On the other hand the damage deposit is any advance of money that is specifically used to cover just physical damage to the premises.