Security deposit rules by state: what to look up before you collect a deposit

The short version

Before you collect a deposit, look up eight things for your state (and your city, if it has its own rental rules): the cap, where the money must be held, whether interest is owed, what you can deduct, the move-in paperwork required, the return deadline, the itemized-statement rule, and the penalty for getting it wrong. Write the answers on one page and keep it with your lease.

The 8 things to look up for your state

• Deposit cap: the most you can collect, and whether pet deposits, furnished units, or other fees count toward it.
• Holding rules: whether the money must sit in a separate or in-state account, and whether you must tell the tenant where it is.
• Interest: whether you owe the tenant interest on the deposit, at what rate, and how often you pay or credit it.
• Allowed deductions: usually unpaid rent and damage beyond normal wear and tear; check whether cleaning, unpaid utilities, or other charges are allowed.
• Move-in paperwork: whether a written move-in condition report or a deposit receipt is required, and what it must say.
• Return deadline: how many days after move-out you have, and how the clock starts.
• Itemized statement: what it must list, whether receipts or estimates must be attached, and how it must be delivered.
• Penalties: what happens if you miss the deadline or keep money you shouldn’t, which in some states can be a multiple of the deposit.

Where to find the official answers

• Your state attorney general or consumer protection office. Many publish a free landlord-tenant guide that covers deposits in plain language.
• Your state’s landlord-tenant statute. Search your state legislature’s website for “security deposit” in the landlord-tenant chapter, and note the section number.
• Your city or county housing department, if you rent in a place with local rental rules (larger cities often add deposit or interest requirements).
• Court self-help sites and legal aid organizations in your state, which often explain the deposit return process from the tenant side, which is exactly how a judge will see it.
• Your local landlord association, for state-specific forms. Still compare their forms with the statute.

At move-in: set the deposit up right

• Write the deposit amount, what it covers, and the return process in the lease.
• Keep the deposit separate from rent, pet rent, and any last month’s rent, each with its own line.
• Give a receipt and any notice your state requires about where the deposit is held.
• Do a room-by-room move-in inspection with dated photos, and have both sides sign it.
• Apply the same deposit policy to every applicant with the same profile, so nothing turns on a protected class.

At move-out: return it on time

• Get the tenant’s forwarding address in writing.
• Inspect with the move-in report and photos side by side, and photograph the same angles.
• Separate normal wear and tear from damage before you price anything.
• Send the itemized statement and any refund before your state’s deadline, by a method you can prove.
• Keep copies of everything: the report, photos, invoices or estimates, the statement, and proof of delivery.
• For taxes, track any amount you keep, since it is income in the year you keep it (IRS Publication 527).

Official places to start

• USA.gov: find your state attorney general — many publish landlord-tenant guides that cover deposits
• USA.gov: find your state consumer protection office
• USA.gov: tenant rights and landlord-tenant help by state
• IRS Publication 527: Residential Rental Property — how security deposits and advance rent are taxed
• 42 U.S.C. 3604: discrimination in housing — Cornell LII

Related checklists

Most deposit disputes are won or lost on the move-in report and the photos. These pages cover the rest of the process.

• Security deposit deductions: wear and tear vs. damage
• Move-in / move-out inspection checklist
• Rent-ready turnover checklist
• Residential lease agreement checklist