Security Deposit Laws by State: What Every Landlord Must Know

Why security deposit laws matter

Security deposit disputes are the most common source of landlord-tenant lawsuits. Every state has different rules about how much you can collect, where you must store it, and how quickly you must return it. Getting it wrong can cost you penalties of 2-3x the deposit amount in some states.

How much can you collect?

Most states cap security deposits at 1-2 months' rent. Some have no cap at all. Here's a breakdown of the most common landlord states:

No state cap: Texas, Ohio, North Carolina, Colorado, Illinois (but local ordinances may apply). In these states, you can technically collect any amount, though market norms keep it at 1-2 months.

One month's rent maximum: California (as of 2024), New York (most units), Massachusetts, Vermont, Kansas.

Two months' rent maximum: New Jersey, Pennsylvania, Florida, Georgia, Tennessee, Michigan, Virginia.

Variable or unique rules: Some states like Connecticut and Maryland have caps that depend on the tenant's age or the length of the lease.

Always check your specific state and local jurisdiction. City-level ordinances (particularly in Chicago, New York City, Seattle, and Portland) often add requirements on top of state law.

Where must you store it?

Many states require landlords to hold security deposits in a separate bank account — not commingled with your personal or business funds. Some states go further:

States requiring separate accounts: New York, New Jersey, Connecticut, Massachusetts, Maryland, Pennsylvania (for 25+ units), Florida.

States requiring interest-bearing accounts: New York, New Jersey, Connecticut, Maryland, Massachusetts, Minnesota, Virginia (for 25+ units).

States with no specific requirements: Texas, North Carolina, Ohio, Indiana, Georgia.

If your state requires a separate account, open a dedicated savings account at your bank and deposit the security deposit within the required timeframe (often 30 days of receipt).

When must you return it?

The clock starts when the tenant moves out and returns possession of the unit. Deadlines range from 14 days to 60 days depending on the state:

14 days: Hawaii, Louisiana, Vermont.

21 days: California.

30 days: Texas, Florida, North Carolina, Colorado, Georgia, Michigan, Virginia, Tennessee, Arizona, Illinois, Ohio, Washington, Oregon.

45 days: Maryland.

60 days: Alabama.

Missing the deadline can result in penalties. In some states (like California and Massachusetts), failing to return the deposit on time means you forfeit the right to make any deductions and may owe the tenant additional penalties.

What can you deduct?

Generally, landlords can deduct for:

• Unpaid rent
• Damage beyond normal wear and tear
• Cleaning costs to restore the unit to its move-in condition
• Unpaid utilities that are the tenant's responsibility
• Lease violation fees specified in the lease

Normal wear and tear is the most contested issue. Scuffed paint from furniture, minor carpet wear in traffic areas, and small nail holes are generally considered normal. Holes in walls, stained or burned carpet, broken fixtures, and excessive filth are deductible damage.

Best practice: Do a thorough move-in inspection with photos and a written checklist signed by the tenant. Do the same at move-out. The comparison between the two is your evidence if there's ever a dispute.

The itemized statement

Most states require you to provide an itemized written statement showing each deduction from the security deposit, along with receipts for any repairs. Send this with the remaining deposit (or in place of the deposit if deductions exceeded the amount).

Keep copies of everything for at least 3-5 years. If a tenant disputes the deductions, your documentation is your defense.

The simplest way to stay compliant

Know your state's rules on three things: the maximum amount, the return deadline, and the account requirements. Document the unit's condition at move-in and move-out with photos. Return the deposit with an itemized statement within the deadline. These three habits will keep you out of trouble in any state.

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