Security Deposit Rules by State: Caps, Interest and Deadlines

There is no federal security deposit law for private rentals, so each state sets the rules: how much you can collect, where the money sits, whether it earns interest for the tenant, and how fast you must return it with an itemized statement. Deadlines in the states below run from 14 days in New York to 45 days in Virginia and Maryland, and a late or missing statement often costs more than the deductions were worth: New York and Washington take away the right to keep any of the deposit, and Massachusetts adds triple damages.¹²³⁴⁵

This guide quotes statute text from the states named. It is not legal advice, and cities can add rules on top. Look up your state at /states.

How state laws differ

Six questions decide whether a deposit is handled correctly. Each subsection below gives verified examples and links to the full 50-state comparison.

Caps on the amount

Labels do not get around a cap. California counts "any payment, fee, deposit, or charge" imposed at move-in, including advance rent, and bars any lease clause calling security "nonrefundable."⁶ Arizona caps security, including prepaid rent, at one and one-half month's rent and treats any fee not designated nonrefundable in writing as refundable.⁹ Maryland lets a tenant recover up to three times the excess charged.⁴ Compare every state at /laws/security-deposit-limits-by-state.

Separate account or trust rules

The deposit is the tenant's money. The holding rules differ in where it must sit and what the tenant must be told.

• Florida: hold it in a separate Florida account (interest-bearing or not) and never commingle or pledge it, or post a surety bond with the circuit court clerk for the lesser of total deposits held or $50,000 ($250,000 statewide with the Secretary of State if you rent in five or more counties). Landlords with five or more units must tell the tenant in writing, within 30 days, where the money is held.¹⁰
• Massachusetts: a separate, interest-bearing account in a Massachusetts bank, beyond the reach of the landlord's creditors. Within 30 days the tenant gets a receipt naming the bank, its location, the amount and the account number. Failure entitles the tenant to immediate return of the deposit.⁵
• Maryland: within 30 days, an interest-bearing account at a Maryland branch of a federally insured institution, used only for security deposits.⁴
• New York: held in trust and never mingled with personal money. Buildings with six or more units must use an interest-bearing account at a bank in New York, and the tenant gets written notice of the bank's name and address and the amount.¹¹

Washington and Connecticut also require a trust or escrow account at an in-state institution with written notice to the tenant.¹²⁷ Compare holding rules at /laws/security-deposit-interest-by-state, and for broker trust account mechanics see /guides/property-management-trust-accounting-rules.

Interest owed to the tenant

New York requires interest only in buildings of six or more units, at the prevailing local rate, and lets the landlord keep 1% a year for administration.¹¹ Florida owes interest only if the landlord picks the interest-bearing account (at least 75% of the account's annualized rate, or 5% simple) or the surety bond (5% simple).¹⁰ Washington lets the landlord keep trust account interest unless agreed otherwise in writing.¹² Connecticut publishes a new rate every year, so update your calculation each January.¹³

Itemized statements

Most states require a written, itemized list of deductions. Some demand proof behind each line.

• California: if repair and cleaning deductions exceed $125, attach invoices or receipts, or for in-house work describe it with time spent and hourly rate, plus the required photos.⁶
• Massachusetts: the list must be "sworn to by the lessor or his agent under pains and penalties of perjury" and include written evidence of cost such as estimates, bills, invoices or receipts.⁵
• Washington: a "full and specific statement" with copies of estimates or paid invoices, and time and hourly rate for in-house repairs.²
• Maryland: supporting documentation identifying materials or services. An estimate is allowed, but you must send the final invoice and refund any overage within 30 days after repairs.⁴

Return deadlines

Connecticut cut its deadline from 30 to 21 days in 2023 (P.A. 23-207).⁷ In Florida, a tenant who does not object within 15 days of the claim notice lets the landlord deduct, and the balance is due within 30 days of the notice.¹⁰ In Virginia, if damages exceed the deposit and need an outside contractor, notice within the 45 days buys another 15 days to itemize.³ California now requires an electronic refund to a tenant who paid the deposit or rent electronically unless the parties agree otherwise in writing, under AB 414, effective January 1, 2026.⁶ Compare every state at /laws/security-deposit-return-deadlines-by-state.

Penalties for wrongful withholding

Burden of proof sits on the landlord in California, New York, Texas and Minnesota.⁶¹⁸¹⁴

Normal wear and tear vs damage

Every statute above bars charging for ordinary wear. A few define it or limit how it is applied.

Texas defines "normal wear and tear" as "deterioration that results from the intended use of a dwelling," and excludes deterioration from "negligence, carelessness, accident, or abuse" by the tenant, a household member or a guest.⁸ Faded paint and traffic paths in carpet are use. A burn or a pet-chewed door frame is not.

California bars claims for ordinary wear and tear "whether the wear and tear preexisted the tenancy or occurred during the tenancy, or for the cumulative effects of ordinary wear and tear occurring during any one or more tenancies." Charges are limited to restoring the unit to its condition at the start of the tenancy, and professional carpet cleaning is chargeable only when needed to reach that condition.⁶

Washington bars deductions for "wear resulting from ordinary use," for carpet cleaning unless documented wear goes beyond that, for items whose condition was not documented on the move-in checklist, and for more than the damaged portion when only part of an item is damaged.² New York bars deductions for ordinary wear and for damage left by a prior tenant.¹

In practice, managers charge the cost to repair the specific damage, not to replace a worn item with a new one, and keep the move-in record that shows what changed.

Move-in and move-out documentation

Several states make documentation a condition of keeping any money.

Move-in records required by statute:

• Washington: no deposit may be collected unless the lease is in writing and the tenant receives a checklist describing the condition and cleanliness of the unit, signed and dated by both parties. Collecting without one makes the landlord liable for the amount of the deposit.¹⁵
• Massachusetts: a signed statement of condition, with a required bold-type notice, within 10 days after the tenancy starts (or on receipt of the deposit, if later). The tenant has 15 days to return it with additions. Damage listed on it cannot be deducted later unless it was repaired and the new damage is unrelated.⁵
• Arizona: at move-in, a signed lease copy, a move-in form for existing damage, and written notice that the tenant may attend the move-out inspection.⁹
• California: photos of the unit at the start of tenancies beginning on or after July 1, 2025, and at move-out (since April 1, 2025) both before and after repairs. Photos must accompany repair and cleaning deductions over $125.⁶

Pre-move-out inspections on request:

• California: written notice of the right to an initial inspection, held no earlier than two weeks before the tenancy ends, with an itemized list the tenant can cure before leaving.⁶
• New York: written notice of the right to an inspection one to two weeks before the end of the tenancy, with 48 hours' notice and a chance to cure.¹
• Minnesota: notice of the option for an initial inspection at the start of the tenancy or within 14 days, and of a move-out inspection no earlier than five days before move-out. Agreed photos or video can substitute.¹⁶ Failing to give that notice is a ground for the deposit penalty.¹⁴

Maryland and Virginia give the tenant a right to be present at the move-out inspection, and Maryland's landlord forfeits the right to withhold for damages if it skips that process.⁴³ Build these steps into /playbooks/tenant-move-in and /playbooks/move-out-turnover.

Alternatives to deposits

States that allow deposit replacements attach disclosure rules and keep the tenant liable for damage.

Florida fee in lieu (section 83.491). Since July 1, 2023, a landlord may offer a fee in lieu of a deposit. Offering it is optional, but once offered it must go to all new tenants at the same property, and the choice cannot be used to approve or deny an application. The agreement must be in writing with a statutory disclosure stating that the fee is not a deposit and does not reduce the tenant's liability for rent or damage. Within 30 days after move-out the landlord must notify the tenant of amounts owed, and cannot file an insurance claim until 15 days after that notice. The fee is not a security deposit.¹⁷

Maryland surety bonds. A tenant may buy a bond instead of all or part of the deposit, but the landlord may not require one and need not accept one. The bond, or bond plus deposit, may not exceed two months' rent. The landlord must mail an itemized list at least 10 days before claiming, and the tenant may pay directly instead.⁴

Virginia damage insurance. A landlord may accept damage insurance in lieu of a deposit if the insurer is licensed by the State Corporation Commission and coverage is at least the deposit amount. The tenant may switch to a full deposit at any time.³ Deposit plus damage insurance premiums may not exceed two months' rent.¹⁸

Massachusetts. The statute authorizes the state housing office to write regulations allowing an optional fee in lieu, capped at one month's rent in total and offered to every approved applicant.⁵ Confirm the regulations are in effect before offering one.

Deposits when a property is sold or management changes

Transfers are where deposits get lost. The statutes put the burden on the parties to the handoff.

• Florida: on a sale or "upon a change in the designated rental agent," deposits and earned interest must move to the new owner or agent "with an accurate accounting showing the amounts to be credited to each tenant account." A written receipt releases the transferor. The new owner or agent is presumed to have received each deposit, up to one month's rent.¹⁰
• California: before a voluntary sale, give the buyer a written statement of each deposit and deductions. Then transfer the balance and notify the tenant, or refund it with an itemized accounting. If the seller does neither, buyer and seller are jointly and severally liable.⁶
• Massachusetts: transfer the deposit with interest. The new owner must notify the tenant in writing within 45 days, and the seller stays liable until the transfer and notice are complete.⁵
• Texas: the new owner is liable from the date of title and must give each tenant a signed statement acknowledging responsibility and the exact deposit amount.⁸
• New York: at the deed or within five days, turn the deposit over and notify the tenant by registered or certified mail. Failing to do so is a misdemeanor.¹⁹

For a management takeover, get a deposit ledger by tenant, reconcile it to the trust account balance, and send tenant notices before the first rent cycle. See /playbooks/management-takeover.

Federal tax note

IRS Publication 527 says not to include a security deposit in income when received if you plan to return it. If you keep part or all of it because the tenant breached the lease, include the amount kept in income in that year. If an amount called a security deposit "is to be used as a final payment of rent, it is advance rent" and is income when received.²⁰ Label last month's rent separately from the deposit on owner statements so owners report it in the right year. For Form 1099 rules on owner payments, see /guides/1099-rules-property-managers-2026.

What to do now

1. Audit amounts on file. Compare each deposit, plus any move-in fees, against your state's cap, counting prepaid rent where the statute counts it.⁶⁹
2. Confirm the account. Right state, right account type, trust or escrow title, and written notice to each tenant naming the bank.¹⁰⁵⁴
3. Calendar interest. Set the rate and anniversary payment date per tenant, and update Connecticut's rate each January.¹³
4. Fix move-in paperwork. Signed checklist or statement of condition where required, and dated photos on every unit.¹⁵⁶
5. Add pre-move-out notices to your notice-to-vacate workflow in states that require them.¹¹⁶
6. Set the return clock from the trigger your state uses (vacate, surrender, forwarding address or demand) and work to the shortest deadline you operate in.⁸⁹
7. Standardize the statement. Line items, invoices or estimates, labor time and rate, photos, and a sworn statement in Massachusetts.⁵²
8. Document transfers. Per-tenant ledger, written receipt and tenant notices on every sale or management change.¹⁰⁵
9. Check alternatives against statute before offering a waiver, bond or fee.¹⁷⁴
10. Separate advance rent from deposits on owner statements.²⁰

Put these dates on your /playbooks/compliance-calendar.