Security Deposit Laws by State

Security deposit limits vary dramatically by state:

No Limit States — Alabama, Colorado, Georgia, Illinois, Indiana, Kentucky, Mississippi, Ohio, South Dakota, Texas, West Virginia, Wisconsin, and Wyoming have no statutory cap on security deposits. However, courts may still find an unreasonable deposit to be unconscionable.

1 Month's Rent — California (as of 2024), Kansas, and several others limit deposits to 1 month's rent regardless of whether the unit is furnished.

2 Months' Rent — Alaska, Arizona, Hawaii, New York, and others cap deposits at 2 months' rent.

Variable — Some states set different limits based on tenant age (seniors often get lower limits), furnished vs. unfurnished units, or the landlord's portfolio size.

Best Practice: Even in no-limit states, keeping deposits at 1-2 months' rent is standard. Higher deposits make your property less competitive and may attract legal scrutiny.

Several states require landlords to handle security deposits in specific ways:

Separate Account — Many states (Connecticut, Florida, Iowa, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, and others) require deposits to be held in a separate, dedicated bank account — not commingled with your personal or business funds.

Interest-Bearing Account — Some states (Connecticut, Florida, Maryland, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Virginia) require deposits to be held in interest-bearing accounts, with interest paid to the tenant periodically or at move-out.

Written Receipt — Many states require you to provide a written receipt showing where the deposit is held, the account number, and the bank name.

Failure to comply with storage requirements can result in forfeiture of the deposit — meaning you must return it in full regardless of damage.

Generally, landlords may deduct for:

Unpaid rent — Any rent the tenant owes at move-out.

Damage beyond normal wear and tear — Holes in walls, stained carpets, broken fixtures, or missing appliances are deductible. Normal wear and tear — minor scuffs, faded paint, worn carpet in traffic areas — is NOT deductible.

Cleaning — If the unit requires cleaning beyond normal move-out condition. If the tenant leaves it broom-clean, you generally cannot deduct cleaning costs.

Lease violation costs — Costs incurred due to lease violations, such as unauthorized pet damage or early termination fees (if specified in the lease).

You CANNOT deduct for: - Normal wear and tear (paint fading, carpet wearing) - Pre-existing damage (document everything at move-in) - Improvements or upgrades you planned anyway - Time spent managing the turnover

Every state has a deadline for returning the security deposit (or an itemized statement of deductions) after the tenant moves out:

14 days — Alaska, Arizona, Hawaii, Vermont, Washington

21 days — California, Montana

30 days — Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming

45-60 days — Alabama (60), Arkansas (60), Maryland (45), Massachusetts (30), Mississippi (45), North Dakota (30), South Dakota (45)

Missing the deadline can result in automatic forfeiture of your right to make deductions, and in some states, penalty damages of 2-3x the deposit amount.

When returning a security deposit (or any portion of it), nearly every state requires an itemized written statement listing:

1. Each deduction and the specific reason 2. The dollar amount of each deduction 3. Receipts or estimates for repairs (required in some states) 4. The remaining balance being returned

This statement must be mailed to the tenant's last known address (or forwarding address if provided). Keep a copy for your records — you may need it if the tenant disputes the deductions.

Pro Tip: Take timestamped photos of all damage before and after repairs. This evidence is invaluable in small claims court.