landlord-tenant-law-basics) by State: Limits, Returns, and Penalties

Security deposits are one of the most heavily regulated aspects of landlord-tenant relationships in the United States. Every state has specific laws governing how much landlords can charge, how long they have to return deposits, and what penalties apply for violations. Understanding these rules is crucial for landlords who want to avoid costly legal disputes and maintain compliance.

This comprehensive guide breaks down security deposit laws across all 50 states, helping landlords navigate deposit limits, return timeframes, interest requirements, and the consequences of non-compliance.

What Is a Security Deposit?

A security deposit is money collected by a landlord at the beginning of a tenancy to cover potential damages beyond normal wear and tear, unpaid rent, or other [lease violations](/blog/dealing-with-problem-tenants). Unlike the first month's rent, a security deposit is not payment for housing—it's a refundable amount held in trust.

Most states distinguish between different types of deposits:

Security deposits: Cover damages and unpaid rent
Pet deposits: Cover pet-related damages
Last month's rent: Pre-payment for the final month of tenancy
Non-refundable fees: Allowed in some states for specific purposes

State-by-State Security Deposit Limits

States with No Statutory Limit

Several states do not impose maximum limits on security deposits, leaving the amount to market forces and landlord discretion:

Arizona: No limit, but must be reasonable
Colorado: No limit
Florida: No limit
Idaho: No limit
Indiana: No limit
Mississippi: No limit
Missouri: No limit (Kansas City has local limits)
New Mexico: No limit for properties with 5+ units
Ohio: No limit
South Carolina: No limit
Utah: No limit
West Virginia: No limit
Wyoming: No limit

States Limiting Deposits to One Month's Rent

Many states cap security deposits at one month's rent:

Alabama: 1 month (no written lease required)
Louisiana: 1 month
North Carolina: 1.5 months for month-to-month; 2 months for longer terms
Vermont: 1 month (unfurnished)
Washington: 1 month (plus pet deposit)

States Limiting Deposits to Two Months' Rent

Arkansas: 2 months
Georgia: No limit, but most courts expect reasonableness (commonly 2 months)
New York: 1 month (under rent stabilization); varies otherwise
Oregon: No limit for first year; after that, can only increase if rent increases

States with More Complex Formulas

Some states have deposit limits that vary based on property type, lease term, or tenant age:

[California](/blog/california-heloc-guide): 2 months for unfurnished; 3 months for furnished; additional deposit for waterbed
Connecticut: 2 months (1 month if tenant is 62+)
Delaware: 1 month on leases for one year or more; no limit on month-to-month
Illinois: No state limit, but Chicago limits to 1.5x monthly rent
Massachusetts: 1 month, plus first month's rent, last month's rent, and cost of new lock
Michigan: 1.5 months
New Jersey: 1.5 months
Pennsylvania: 2 months for first year; 1 month after first year
Rhode Island: 1 month
Tennessee: No statutory limit, but common law suggests reasonableness

Security Deposit Return Deadlines by State

Return deadlines vary significantly and often depend on whether the tenant provided a forwarding address:

14 Days or Less

Arizona: 14 business days
Louisiana: 1 month
Massachusetts: 30 days
Nevada: 30 days
Wyoming: 30 days (15 days if no damage)

21-30 Days (Most Common)

California: 21 days
Connecticut: 30 days (15 days if tenant terminates early)
Florida: 15-60 days depending on whether deductions are made
Illinois: 30-45 days (Chicago requires interest)
New York: 14 days (if not returned, forfeits right to deposit)
Oregon: 31 days
Texas: 30 days
Washington: 21 days

45-60 Days

Maryland: 45 days
New Jersey: 30 days (5 days to notify of deposit disposition)
New Mexico: 30 days

State-Specific Variations

Georgia: 1 month from lease termination
Kentucky: 30-60 days depending on damage extent
North Dakota: 30 days
Tennessee: No statutory deadline (common practice is 30 days)

Interest Requirements on Security Deposits

Only a handful of states require landlords to pay interest on security deposits:

States Requiring Interest

Connecticut: Must place deposits in [escrow account](/blog/mortgage-escrow-explained) at bank; tenant receives interest minus 1% annual administrative fee.

Illinois: Landlords with 25+ units must pay interest; rate set by regulations.

Iowa: Landlords must pay 5% simple annual interest for leases of 9+ months.

Maryland: Must pay 3% simple interest annually (some counties require placement in special accounts).

Massachusetts: Deposits must be held in separate interest-bearing account; tenant receives 5% annual interest or actual interest earned, whichever is less.

Minnesota: Must pay 1% simple annual interest for deposits held over one year.

New Hampshire: Deposits over $100 require annual interest payment.

New Jersey: Must place deposits in insured account and pay interest annually.

New Mexico: Deposits must be in New Mexico bank; landlords with property valued over $1M must pay passbook interest.

New York: Some local requirements (e.g., buildings with 6+ units in NYC).

North Dakota: Must pay 5% annual interest if lease is at least 9 months.

Pennsylvania: Must place deposits in escrow account; tenants in properties with 25+ units get interest minus 1% fee after two years.

Virginia: Must pay interest on deposits held for over 13 months.

Allowable Deductions from Security Deposits

Landlords can generally deduct for:

✅ Unpaid rent (virtually all states) ✅ Damage beyond normal wear and tear (all states) ✅ Cleaning costs to restore property to move-in condition (most states) ✅ Unpaid utilities (if specified in lease) ✅ Broken lease costs (varies by state)

Landlords cannot deduct for:

❌ Normal wear and tear (faded paint, worn carpet from normal use, minor scuffs) ❌ Pre-existing damage (must be documented at move-in) ❌ Routine maintenance ❌ Improvements or upgrades ❌ Cleaning beyond what's necessary to return to original condition

[Documentation](/blog/heloc-documentation-requirements) Requirements

Most states require landlords to provide itemized deduction statements:

Best Practice Documentation:

Move-in inspection: Photo/video documentation with timestamps
Itemized deduction list: Specific damage, cost of repair, receipts
Written notice: Sent to tenant's last known or forwarding address
Proof of mailing: Certified mail or tracking confirmation

States with Strict Documentation Rules:

California: Must provide copies of receipts for repairs over $126
Washington: Must provide detailed list with replacement/repair costs
Oregon: Must provide written accounting of any deposit disposition

Penalties for Wrongful Withholding

Landlords who wrongfully withhold security deposits face significant penalties:

Double or Triple Damages

California: Bad faith withholding = up to 2x deposit amount
Connecticut: Double damages if deposit not returned within 30 days
Maryland: 3x deposit amount if withheld in bad faith
Massachusetts: 3x damages plus attorney fees
Michigan: 2x deposit amount
New Jersey: Double damages plus attorney fees
New York: Double damages in some jurisdictions
Rhode Island: Double damages
Tennessee: 2x deposit amount plus attorney fees

Forfeiture of Right to Deduct

California: Failure to provide itemized statement within 21 days = forfeits all deductions
Florida: Failure to provide notice within 30 days = forfeits right to keep deposit
Nevada: Failure to return within 30 days = forfeits all deductions

Attorney Fees and Court Costs

Many states allow tenants to recover attorney fees if they prevail in deposit disputes:

Illinois
Massachusetts
New Jersey
Oregon
Washington

Special Situations

Abandoned Property

When tenants abandon property, special rules often apply:

Landlords typically must store belongings for a specified period
May deduct storage costs from security deposit
Must follow state-specific notification procedures

Military Service Members

The Servicemembers Civil Relief Act (SCRA) provides protections for military members:

Can terminate lease early for deployment
Entitled to full deposit return (minus legitimate deductions)
Special notification requirements apply

Sale of Rental Property

When [selling rental property](/blog/selling-rental-property-guide):

Must transfer security deposits to new owner
Provide written notice to tenants of deposit transfer
New owner assumes all deposit obligations

Best Practices for Landlords

Document everything: Photos, videos, written communications
Use move-in/move-out checklists: Have tenants sign at both stages
Provide written notice: Even when not required by law
Meet deadlines: Calendar state-specific return deadlines
Keep deposits separate: Never commingle with personal funds
Be reasonable: Courts favor tenants in close-call situations
Provide receipts: Even in states that don't require them
Know local laws: City/county ordinances may be stricter than state law
Consider surety bonds: Alternative to cash deposits in some states
Consult an attorney: When in doubt about complex situations

Frequently Asked Questions

Q: Can I charge a non-refundable deposit? A: This depends on your state. Some states (like California) prohibit non-refundable deposits entirely. Others allow non-refundable fees for specific purposes (pet fees, cleaning fees) but require them to be clearly labeled and documented separately from refundable security deposits.

Q: What happens if I don't return the deposit on time? A: Penalties vary by state but often include forfeiture of the right to make deductions, double or triple damages, and liability for the tenant's attorney fees. Even in states without specific penalties, you may lose in small claims court and be ordered to pay the full deposit.

Q: Can I use the security deposit to cover the last month's rent if the tenant doesn't pay? A: Generally yes, unpaid rent is an allowable deduction in all states. However, if you collected "last month's rent" separately, that money must be applied to the final month—you cannot apply both the last month's rent AND the security deposit to the same period.

Q: Do I need to put the security deposit in a separate bank account? A: This varies by state. Some states (like Massachusetts and New Jersey) require separate, interest-bearing accounts. Others have no such requirement. However, it's always a best practice to keep deposits separate from your personal or business operating funds.

Q: Can I charge a pet deposit in addition to a security deposit? A: Most states allow additional pet deposits, but they often count toward the maximum deposit limit. For example, in California's 2-month limit for unfurnished rentals, a pet deposit would count toward that total, not in addition to it.

Q: What constitutes "normal wear and tear"? A: Normal wear and tear includes minor deterioration from ordinary use: slightly faded paint, worn carpet in traffic areas, small nail holes from picture hanging, dirty grout, loose door handles. Damage includes large holes, pet stains, broken fixtures, missing appliances, or destruction beyond expected use.

Q: Can I deduct for carpet cleaning? A: Only if the carpet is excessively dirty beyond normal use. You cannot charge for routine carpet cleaning between tenants if the carpet is in generally good condition with normal wear. If the carpet has stains, odors, or excessive dirt, cleaning costs may be deductible.

Q: What if the tenant doesn't provide a forwarding address? A: You still must attempt to return the deposit. Send the itemized statement and any remaining deposit to the last known address (the rental unit) by certified mail. Keep proof of your attempt. Some states extend the return deadline if no forwarding address is provided, but you cannot simply keep the deposit.

Q: Can I increase the security deposit during the tenancy? A: Generally, you cannot increase a security deposit during the lease term unless the lease specifically allows it or the tenant agrees in writing. For month-to-month tenancies, you may be able to increase the deposit with proper notice (30-60 days typically), but it must still comply with state maximum limits.

Q: What records should I keep regarding security deposits? A: Maintain: (1) Move-in inspection reports with photos/video; (2) Signed lease agreement stating deposit amount; (3) Proof of deposit payment; (4) Move-out inspection reports; (5) Repair receipts and invoices; (6) Before/after photos of damages; (7) Written communications about the deposit; (8) Proof of deposit return or itemized deduction statement; (9) Bank records showing deposit held separately (if required).

Security deposit laws are complex and vary significantly by jurisdiction. Landlords should consult with local attorneys or [property management](/blog/property-management-complete-guide) professionals to ensure full compliance with state and local regulations. When in doubt, err on the side of transparency and generosity—it's far cheaper to return a questionable deduction than to defend against a lawsuit seeking triple damages and attorney fees.

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Security Deposit Laws by State: Limits, Returns, and Penalties

Key Takeaways