Security deposit rent is one of the most important and often debated parts of any rental agreement. For landlords, it’s a way to protect the property and cover potential damages. For tenants, it’s about ensuring fairness and transparency.
As a landlord, it’s important you understand how security deposits work and the laws that govern them. This guide breaks down the basics, covers key legal considerations by state, and explains what happens to your deposit if a lease ends early.
What is a security deposit for rent?
A security deposit is a non-refundable payment from a tenant before moving into a rental property. This money remains the tenant’s property but is held by the landlord, serving as financial protection against potential losses such as:
- Property damage beyond normal wear and tear
- Unpaid rent
- Lease violations
- Cleaning costs required to restore the unit to its pre-tenancy condition
According to Zillow’s rental data, the average security deposit in the United States was approximately $750 in 2024, though this varies significantly by location and property value.
How much can landlords charge for security deposits?
The typical amount for security deposits is one month’s rent, although it can be two or even three months’ rent in certain cases (e.g., furnished or luxury rentals). For example, in Alaska, the maximum for security deposits is two or three months’ rent (except for units renting for more than $2,000).
The typical landlord security deposit among single-family renters who pay one was $1,000, higher than the median for renters in multifamily ($530) and other types ($750) of buildings.
State limits on security deposits
Below is a table of vacation rental tax by state.
| State | Maximum Security Deposit |
|---|---|
| Alabama | 1 month’s rent |
| Alaska | 2 or 3 months' rent (except for units renting for more than $2,000) |
| Arizona | 1.5 months' rent |
| Arkansas | 2 months' rent |
| California | 1 to 2 months' rent |
| Colorado | 2 months' rent |
| Connecticut | 2 months' rent (1 month for tenants 62 years of age or older) |
| Delaware | 1 month's rent |
| Georgia | 2 months' rent |
| Hawaii | 1 month's rent |
| Iowa | 2 months' rent |
| Kansas | 1 or 2 months' rent (depends on furnishing and pets) |
| Maine | 2 months' rent |
| Maryland | 2 months' rent |
| Massachusetts | 1 month's rent |
| Michigan | 1.5 months' rent |
| Missouri | 2 months' rent |
| Nebraska | 1 month's rent |
| Nevada | 3 months' rent |
| New Hampshire | 1 month's rent |
| New Jersey | 1.5 months' rent |
| New Mexico | 1 month's rent (leases under 1 year); no limit for longer leases |
| New York | 1 month's rent |
| North Carolina | 2 months' rent (leases over 2 months); 1.5 months' rent (month-to-month) |
| North Dakota | 1 or 2 months’ rent (depends on pets or criminal history) |
| Pennsylvania | 2 months' rent (1st year), 1 month's rent (subsequent years) |
| Rhode Island | 1 month's rent |
| South Dakota | 1 month's rent |
| Virginia | 2 months’ rent |
| Other states | No statutory limit |
Even in states without specific limits, deposits should be reasonable to remain competitive in the rental market.
For example, California’s old rules allowing up to three months’ rent, a one-bedroom San Francisco apartment could require a deposit as high as $10,000, and in Los Angeles averages around $8,000 were reported.
Even in expensive cities, setting a deposit too high can deter prospective tenants, especially since many renters struggle to save that much (over one-third of renters say coming up with deposit money is a major challenge).
If you set it too low, you might end up without enough coverage if something goes wrong. Striking a balance is important: typically, one month’s rent is seen as enough to cover most issues while still being feasible for tenants.
How security deposits work with the first and last month’s rent
When initiating a lease, landlords often collect various upfront payments to safeguard their property and ensure financial security. These typically include the first and last month’s rent and security deposit, which serve different purposes. Understanding the distinctions and proper handling of these payments is crucial for compliance and maintaining positive tenant relationships.
Understanding the differences
- First month’s rent (non-refundable): Initial payment for the first month of occupancy. It’s standard practice to collect this before move-in.
- Last month’s rent (non-refundable): Prepayment for the last month of a lease, ensuring funds are available if the tenant vacates without notice. Some jurisdictions restrict or prohibit collecting last month’s rent in advance.
- Security deposit (refundable): This refundable deposit covers potential damages beyond normal wear and tear or unpaid rent. It’s not for regular rent payments unless
Three-quarters of renters (75%) said that paying their first month’s rent was required to secure their rental. However, only a quarter (25%) said they had to pay their last month’s rent to secure their rental, explicitly agreed upon in the lease.
Landlord obligations: Properly handling the deposit
Once collected, you must follow strict guidelines for handling security deposits:
Separate accounts
How and where security deposits are held is also often governed by law. Many states require you to keep security deposits in separate accounts from personal or business funds. Here are some examples:
- Maryland: Deposits over $50 must be placed in a separate, interest-bearing account.
- New York: Buildings with 6+ units require separate interest-bearing accounts.
- New Jersey: Must be held in a separate interest-bearing account or insured money market fund for landlords who own 10 or more units.
In certain areas, local regulations specify holding deposits in an escrow account. This is a separate, non-operational account managed by a neutral third party (bank or trust company). Learn more about state laws and steps for how to open an escrow account for security deposits.
Interest requirements
Some states require landlords to pay interest on the security deposit while it’s held. In fact, 17 states have laws mandating interest on residential security deposits held for more than a certain period, including:
- New York: Prevailing rate for similar deposits, paid annually (less a 1% admin fee).
- Connecticut: Interest at the average rate of insured savings institutions, paid annually as a credit or direct deposit.
- Massachusetts: 5% or the amount received from the bank (whichever is less), paid annually in cash or a rent credit.
In states without these requirements, any interest the account accrues can be kept by the landlord unless local laws say otherwise.
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When and how to adjust security deposits
Knowing when and how to adjust a security deposit is key to protecting your rental investment and staying compliant. If you’re planning to increase the amount, be sure to communicate clearly and collect the updated security deposit before signing lease renewals or extensions. Always document changes in writing to avoid misunderstandings.
New lease security deposit adjustments
Security deposits are typically collected at the start of a new lease, but the amount, structure, and requirements may vary depending on the lease terms, tenant profile, and local laws.
When to adjust:
- New tenancy: Every new lease is a clean slate, meaning you can assess the deposit based on current rent rates, property condition, and regulations.
- Tenant risk factors: Landlords may opt to increase the security deposit (within legal limits) for new tenants with poor credit history, inconsistent rental history, or negative landlord references.
- Furnished rentals: A higher deposit may be requested for furnished units to account for potential damage to furniture or appliances.
Local law updates: New leases should reflect any changes in state or city regulations on allowable deposit amounts or handling requirements.
How to adjust:
- Calculate based on rent: Most landlords charge one to two months’ rent as a deposit. Always check your state’s cap, New York, for example, limits it to one month’s rent.
- Update lease language: Clearly state the security deposit amount, what it covers, and the conditions for return. Include language about separate holding accounts and any interest owed, if applicable.
- Use a separate bank account: For compliance and transparency, store deposits in a dedicated account (some states require it to be interest-bearing).
- Provide a deposit receipt: Even if not required, providing a security deposit receipt helps maintain trust and reduces legal risks.
Tip: If you’re onboarding a new tenant mid-year or adjusting lease terms, ensure the deposit reflects the most current property condition and rental rate.
Multi-tenant lease security deposit adjustments
Handling security deposits for shared rentals can get tricky, especially when tenants come and go. For a multiple security deposit lease, it’s important to update the deposit amount and records whenever there’s a change in occupancy, ensuring each tenant’s share is clearly documented and fairly managed.
When to adjust:
- New co-tenants: When tenants change mid-lease, you should reassess the multiple security deposit lease and update the agreement. Legally, failing to revise the lease or document deposit changes can lead to disputes over refunds or damages. Always issue a formal addendum outlining new responsibilities and deposit shares.
- End of lease: Upon move-out, disputes often arise when tenants expect their share of the deposit back, especially in shared leases. To avoid confusion, it’s essential to clarify how the multiple security deposit lease is handled upfront. Who is responsible for damages, how deductions are split, and how refunds will be issued. Clear documentation and agreed-upon terms help prevent issues later.
How to adjust:
- Collect one joint deposit: Require one combined deposit and return it as a single amount to avoid disputes.
- Clarify in the lease: Clearly state that all tenants are equally responsible for the condition of the unit and any deductions.
- Communicate during tenant turnover: If one tenant is replaced, either return the original deposit and collect a new one or have incoming tenants reimburse the outgoing tenant.
- Keep a paper trail: Note changes in tenant names, deposit transactions, and signatures in your lease file.
Lease renewal security deposit adjustments
When renewing a lease, it’s a good time to review and adjust the security deposit if needed. Especially if the rent is increasing or new terms are added. Be sure to notify tenants in writing and collect any additional amount before the renewed lease takes effect to stay compliant and avoid confusion.
When to adjust:
- Rent increases or lease changes: When a lease renews, some states allow landlords to increase the security deposit if the rent goes up, while others cap or restrict additional charges. Always check your state’s laws before adjusting the deposit amount.
- Liability shifts: Changes in tenant behavior, pets, or property condition may justify a reassessment.
Policy or legal updates: Some states allow updated terms during renewal, including deposit increases, if limits are not exceeded.
How to adjust:
- Confirm legal limits: For example, Virginia allows up to two months’ rent, even at renewal.
- Give proper notice: Most states require advance written notice (e.g., 30 days) if changes are made. For example, in California, if a landlord plans to increase the security deposit during a lease renewal, they must provide tenants with at least 30 days’ written notice before the new lease terms begin.
- Amend the lease: Use a lease renewal form or addendum to reflect the new deposit amount and terms.
- Document the update: Clearly communicate the reason for the adjustment and provide updated receipts or confirmation.
Increasing rent and security deposit adjustments
When rent increases, you may be able to adjust the security deposit to reflect the new amount, especially if the original deposit was based on one month’s rent. However, state laws vary, and some may cap deposit amounts or restrict increases during renewals, so it’s important to review local regulations first.
When to adjust:
- Rent increase during tenancy: If rent rises, some landlords seek to increase the deposit to maintain a consistent rent-to-deposit ratio.
- Updated property risk: If the property becomes more valuable or upgraded, a higher deposit may be justified, if within legal limits.
How to adjust:
- Review state caps: Even with rent increases, many states limit the total deposit (e.g., Maryland: Two months for unfurnished units).
- Provide advance notice: Let tenants know of deposit adjustments in writing, with clear effective dates.
- Use a lease addendum: Make any changes official by documenting them in writing.
- Explain the rationale: Transparency helps tenants understand the reason behind the increase and reduces friction.
Returning the security deposit
The standard deadline to return a deposit is around 30 days after the tenant moves out and returns the keys. Some states have a shorter period (New York is 14 days), while others are more generous (up to 60 days in Alabama and Arkansas).
Security deposit return deadlines by state
Here are security deposit return deadlines by state.
| State | Return Deadline |
|---|---|
| California | 21 days |
| New York | 14 days |
| Texas | 30 days |
| Florida | 15–30 days (depending on disputes) |
| Maryland | 45 days |
| Massachusetts | 30 days |
| Pennsylvania | 30 days |
Itemized deduction lists
When making deductions, states generally require:
- A written statement detailing each deduction
- The amount of each deduction
- Copies of receipts, estimates, or invoices supporting deductions (required in many states)
Failure to provide itemized deductions can result in forfeiture of the right to make deductions in some jurisdictions, or even penalties up to three times the deposit amount.
What can landlords deduct from security deposits?
In general, deposits can only be used to cover legitimate costs due to the tenant’s breach of the lease, such as unpaid rent or excessive damages. Landlords cannot charge for ordinary wear and tear that occurs as a result of normal living.
Washington explicitly clarifies that landlords can’t keep any deposit funds to repair or clean items that are worn or dirty from “ordinary use of the premises.” This means charges for things like routine carpet cleaning, repainting after a long tenancy, or replacing appliances simply due to age.
The most common source of security deposit disputes stems from confusion about what constitutes normal wear and tear (not deductible) versus actual damage (deductible). Here’s a simple breakdown of both to help you get a better idea:
Normal wear and tear vs. damage
| Normal Wear and Tear (Not Deductible) | Damage (Deductible from Security Deposit) |
|---|---|
| Faded paint or wallpaper from sunlight | Holes in walls from anchors, nails, or screws |
| Minor scuffs on walls or floors | Large stains or burns on flooring |
| Worn carpet in high-traffic areas | Pet stains, odors, or tears in carpet |
| Small nail holes from hanging pictures | Large holes or unauthorized painting |
| Slightly dirty or stained grout | Broken tiles or damaged fixtures |
| Furniture indentations in carpet | Water damage from leaks not reported or repaired |
Other valid deductions
Beyond physical damage, landlords may deduct for:
- Unpaid rent: Any remaining rent owed under the lease.
- Excessive cleaning costs: Costs beyond routine cleaning to restore the unit.
- Unpaid utilities: If specified in the lease that utilities are the tenant’s responsibility.
- Removal of abandoned items: Costs for removing large items left behind.
According to a 2024 Zillow survey, 41% of renters report having at least one move-out disagreement over costs for repairs, damages, maintenance, or utility payments.
The key to avoiding disputes over deductions is documentation, before-and-after photos and detailed cleaning and repair receipts are essential for justifying any charges against the deposit.
Breaking a lease early: How it affects security deposits
Ending a lease early, whether by the tenant or the landlord, raises key questions about what happens to the security deposit. Can the landlord keep it? What deductions are allowed? Here’s how deposits are handled depending on who breaks the lease, why, and what the law allows.
When the tenant breaks the lease early
In most cases, a tenant who terminates their lease early may risk losing part or all of their security deposit, but not automatically. Landlords must follow strict rules and can only deduct from the deposit for:
- Unpaid rent (but only for periods the unit is actually vacant)
- Actual costs incurred (e.g., cleaning, repairs, or re-rental expenses)
- Other legitimate deductions outlined in the lease
Landlords are not allowed to treat the deposit as a blanket penalty or forfeiture. They must document all deductions, follow state return deadlines, and return any unused portion.
Duty to mitigate
In most states, landlords have a legal “duty to mitigate” damages. That means:
- They must make reasonable efforts to re-rent the unit.
- They cannot charge the tenant for the full remaining lease term unless the unit remains vacant despite those efforts.
- Once a new tenant is found, the original tenant’s financial obligation ends.
Common deductions in tenant-initiated terminations
- Rent for the time the unit sat vacant (e.g., 1 month)
- Early termination fee (if included in the lease)
- Cleaning or repair costs beyond normal wear and tear
Example: If a tenant breaks a lease 3 months early and it takes 1 month to find a new tenant, the landlord can deduct one month’s rent, any damage or cleaning costs, and then must return the rest of the deposit.
Legally protected reasons for tenants to break a lease
Some laws provide exceptions that protect tenants who break a lease due to hardship or legal circumstances. In these cases, tenants are often entitled to a full deposit refund (minus normal deductions for damage or unpaid utilities):
- Military deployment: The Servicemembers Civil Relief Act (SCRA) allows active-duty service members to break a lease with 30 days’ notice and proof of orders.
- Domestic violence: Most states allow victims to terminate leases without penalty. Landlords cannot deduct for early termination in these cases.
- Uninhabitable conditions: Tenants may break the lease if the rental violates housing or safety codes and the landlord fails to fix it.
- Harassment or Illegal Entry: Repeated privacy violations or retaliation from a landlord may justify early termination with no penalty.
When the landlord ends the lease early
Landlords may also terminate a lease early, for example, to sell the property, renovate, or if the tenant violates lease terms. How the security deposit is handled depends on the reason and who is at fault:
If the tenant did nothing wrong
Examples:
- Lease ends due to building sale, owner move-in, or redevelopment
- Month-to-month tenancy legally terminated with proper notice
The tenant is entitled to:
- Full return of the deposit, minus any standard deductions (damage, unpaid rent)
- No penalties just because the lease ended early
Landlords cannot use the deposit to cover lost rent or inconvenience if the tenant wasn’t at fault.
If the lease was terminated due to tenant violations
Examples:
- Eviction for non-payment of rent or lease violations
- Repeated nuisance complaints, property damage, or illegal activity
Landlords may deduct from the deposit for:
- Unpaid rent
- Damage beyond normal wear and tear
- Legal costs if allowed under the lease
However, landlords must still:
- Follow standard return timelines
- Provide an itemized list of deductions
- Return any unused balance
Can a landlord keep a security deposit for breaking a lease?
No. Landlords can’t automatically keep the full security deposit simply because a tenant breaks a lease. They may only deduct:
- Unpaid rent (subject to duty to mitigate)
- Actual costs incurred due to the early termination
- Other legitimate deductions (damage, cleaning, etc.) as normal
Landlord’s duty to mitigate damages
Most states impose a “duty to mitigate” on landlords, meaning they must make reasonable efforts to re-rent the property rather than simply charging the departing tenant for all remaining months.
However, landlords usually have a legal duty to mitigate damages when a tenant breaks a lease. This means the landlord must make reasonable efforts to re-rent the apartment as soon as possible, rather than just letting it sit and charging the old tenant for all remaining months.
Many states codify this duty (e.g., in New York, landlords must try to re-rent and can’t simply collect double rent). So, if a new tenant is found quickly, the original tenant may only owe a small amount of rent, and any unused portion of the deposit would need to be returned.
Importantly, if breaking the lease doesn’t actually cause the landlord a loss, the tenant should get their deposit back. For example, if a tenant finds a qualified replacement tenant to take over for them, or if there’s a waiting list of renters ready to move in, the landlord has no rent loss to claim against the deposit (aside from perhaps a minor administrative fee if allowed).
Legally protected reasons for breaking a lease
Certain circumstances may allow tenants to break a lease with limited or no liability:
- Military deployment: Active-duty military personnel can terminate leases with proper notice under the Servicemembers Civil Relief Act (SCRA) after mobilization or upon PCS orders or deployment for 90 days or more.
- Uninhabitable conditions: If the unit violates health or safety codes.
- Domestic violence situations: Many states have protections for victims.
- Landlord harassment or privacy violations: Repeated unlawful entry or harassment.
In these protected scenarios, tenants are typically entitled to a full security deposit return (minus legitimate deductions for damage).
Handling security deposit disputes
Even the most well-meaning landlords can face disputes over security deposits. Understanding common tenant objections—and knowing how to proactively protect yourself—can help you stay compliant and avoid costly legal challenges.
Common reasons for tenant security deposit disputes
- Deposit not returned on time: Most states require deposits to be returned within 14 to 60 days.
- Deductions not itemized: Tenants have a right to a breakdown of any withheld amounts, often including receipts or invoices.
- Improper deposit handling: In states where deposits must be held in separate or interest-bearing accounts, non-compliance can lead to penalties.
- Excessive charges for cleaning or damage: Tenants may contest deductions that appear inflated or subjective.
How to avoid security deposit disputes
- Conduct detailed inspections: Perform thorough move-in and move-out inspections, ideally with the tenant present. Use a checklist and take date-stamped photos of every room, fixture, and appliance.
- Document everything: Keep all receipts for repairs, replacements, and cleaning services. Maintain a written log of communications with tenants about property condition and move-out expectations.
- Follow state laws: Adhere to your state’s rules regarding timelines, itemized deductions, interest accrual, and deposit storage requirements. Non-compliance can void your claim to part or all of the deposit.
- Communicate clearly: Provide tenants with written move-out instructions ahead of time. Let them know how to return keys, clean the unit, and what will be assessed for deductions.
- Use landlord-specific banking solutions: Platforms like Baselane allow you to securely store security deposits in dedicated accounts, track transactions, and generate documentation to support your compliance and protect against disputes.
Pro tip: When in doubt, over-document. Courts tend to side with tenants in the absence of clear, written evidence from landlords.
State-specific security deposit laws
While we’ve covered general principles, security deposit laws vary significantly by state. Some key variations:
California
- Currently allows 2 months’ rent (unfurnished), but will change to 1 month’s rent limit starting July 2024
- 21-day return deadline
- Requires itemized statement
- Interest not required statewide (though some cities mandate it)
New York
- 1 month’s rent maximum
- 14-day return deadline
- Separate interest-bearing account required for buildings with 6+ units
- Mandatory walk-through inspection
Florida
- No statutory limit on amount
- 15-30 day return deadline (depends on dispute)
- No interest requirement
- Written notice required for deductions
Texas
- No statutory limit on amount
- 30-day return deadline
- No interest requirement
- Must provide written description of damages
Pennsylvania
- 2 months’ rent maximum for first year, 1 month thereafter
- 30-day return deadline
- Interest required after second year (if held for more than 2 years). The landlord must provide the tenant with written notice detailing the name and address of the bank where the deposit is held and the amount deposited.
For the most current and detailed information about your state, refer to resources like Nolo’s security deposit state charts or your state’s housing authority website.
Recent law changes and policy updates
The past two years have seen notable updates to security deposit laws and policies across several U.S. jurisdictions. Both tenants and landlords should be aware of these changes, as they can significantly impact deposit amounts and handling:
- California’s New Cap (2024): As of July 1, 2024, Assembly Bill 12 limits residential security deposits in California to one month’s rent, regardless of whether the unit is furnished or unfurnished. This is a major shift from the previous cap of 2–3 months’ rent. An exception applies for small landlords with no more than two properties totaling four or fewer units, who may still collect up to two months’ rent. The law aims to reduce upfront rental costs and aligns California with other states like New York and Massachusetts that already enforce a one-month limit.
- Washington State Reforms (2023): As of July 23, 2023, Washington landlords must provide receipts, invoices, or estimates to justify any security deposit deductions, listing dollar amounts alone is no longer enough. The law also clarifies that landlords cannot charge for normal wear and tear, strengthening tenant protections. The 21-day deadline to return deposits remains, but these updates make it easier for tenants to challenge improper charges.
- New York Ongoing Enforcement: New York’s 2019 Housing Stability and Tenant Protection Act limits security deposits to one month’s rent and requires landlords to return deposits within 14 days with an itemized deduction statement. Failure to provide this forfeits the right to withhold any amount. For buildings with 6+ units, deposits must be held in interest-bearing accounts, with annual interest (minus a small admin fee) paid to tenants. Enforcement efforts increased in 2022–2023 to ensure compliance.
Manage your security deposits with Baselane
Security deposits for rent play a critical role in rental agreements but are often a source of confusion and conflict, especially during lease terminations. Clear understanding and proper handling help you and tenants avoid disputes and stay compliant.
That’s why more landlords are choosing Baselane’s all-in-one banking platform. With automated tracking, high APY, and separate deposit accounts, Baselane makes managing security deposits easier, safer, and aligned with state laws.
Take the guesswork out of deposit management, get started with Baselane today.
FAQs
In most states, no. Security deposits are refundable by definition. Some states allow non-refundable fees (like cleaning fees), but these must be clearly labeled as fees, not deposits, and disclosed in the lease.
Normal wear and tear refers to the expected deterioration of a property from ordinary, everyday use. This includes faded paint, minor scuffs on walls, worn carpet in high-traffic areas, and small nail holes. It doesn't include damage caused by negligence, carelessness, accidents, or abuse of the property.
This varies by state. Many states only allow deductions for cleaning beyond what's considered "normal" cleaning between tenancies. Some states specifically prohibit deductions for routine cleaning if the tenant left the unit in reasonably clean condition.
Consequences vary by state but often include forfeiting the right to make any deductions, liability for returning the full deposit, and in some cases, additional penalties of 2-3 times the deposit amount plus attorney fees.
Yes, in many states, landlords must give tenants a written receipt showing the amount, date, and purpose of the payment. It's a best practice even if not legally required. If you're wondering what do you charge tenants for security deposit in your state, check local laws to confirm.
It can, but only if state law allows it. Some states cap deposit amounts regardless of rent. Check your lease terms and state rules on when can a landlord raise rent or adjust deposits.
Yes, in some cases. If rent is increasing or terms change, landlords may ask for more, if it stays within legal limits. Always give written notice and follow local laws.
In many areas, yes, but some states limit how much you can collect upfront. Airbnb host platform and landlord platforms like Baselane can help manage these payments clearly and in compliance.
