Security Deposits: What They Are, How Much to Collect, and When to Return

A security deposit is money the tenant pays you up front, held for the duration of the lease. You use it to cover unpaid rent or damage beyond normal wear. You must follow state rules on how much you can collect, where you keep it, and when and how you return it—or you can face penalties.

What Is a Security Deposit?

The security deposit is a one-time sum you collect before or at move-in. It stays in your possession (or in a required account) until the tenant moves out. If they leave owing rent or cause damage beyond normal wear and tear, you may deduct from the deposit. Whatever you don't use must be returned within the timeframe your state requires. If you're new to landlording, see What Is a Lease? for where the deposit fits in the contract.

How Much Can You Collect?

Many landlords collect one or two months' rent. State law often caps the amount (e.g. one month, two months, or a multiple of rent). Some states allow extra for furnished units or pets. Check your state—limits and rules vary. For a state-by-state overview, see NOLO's state-by-state landlord-tenant charts. For an overview of landlord-tenant rules that affect deposits, see Landlord Legal Compliance.

Where to Keep It

Some states require you to hold the deposit in a separate account (e.g. escrow or a trust account) and to tell the tenant where it is. Others allow commingling with your funds but still require you to return it with interest in certain cases. Follow your state's rules; failing to hold the deposit correctly can result in penalties or having to return it in full even if damage occurred.

When and How to Return It

After move-out, you typically have a set number of days (often 14–30, depending on state) to either return the full deposit or send an itemized statement listing any deductions and the remainder, plus a check or refund. If you deduct for damage, you must document it and only charge for repairs beyond normal wear. Missing the deadline can mean you lose the right to keep any of the deposit or face extra damages. Document the unit's condition at move-in and move-out so you have proof—see Move-In and Move-Out Inspections for checklists that protect you and your tenants.

Deductions for Damage

You may deduct from the deposit for unpaid rent, damage beyond normal wear and tear (e.g. holes in walls, broken fixtures, stained carpet that wasn't there at move-in), and sometimes cleaning if the unit was left excessively dirty. You generally cannot deduct for normal wear (e.g. faded paint, worn carpet from normal use). Keep receipts and photos; an itemized statement with each deduction and the total returned amount is required in most states. Good move-in and move-out documentation makes disputes much easier to resolve.