Security Deposits, State by State
Caps, escrow rules, interest requirements, and return deadlines vary wildly. Here's how to keep yours out of court.
Security deposit rules are the single most litigated area of small-landlord practice. The good news: staying compliant is mostly a checklist.
Know your state's cap
About half of states cap the deposit at one to two months' rent. Others (Texas, Florida, Illinois) impose no statutory cap. Check the state page for the current number before quoting a figure to a tenant.
Escrow and interest
In several states — Massachusetts, Connecticut, New Jersey, Maryland, and Pennsylvania among them — you must hold the deposit in a separate account and pay interest annually. Commingling with operating funds can forfeit your right to make deductions.
The return clock
Once the tenant moves out and gives you a forwarding address, a clock starts — 14 to 60 days depending on the state. Miss the deadline and you may owe two or three times the deposit as a penalty.