Security deposits are one of the most regulated parts of being a landlord. Each state has its own rules about how much you can collect, how you must hold it, when you have to return it, and what counts as a legitimate deduction. Getting this wrong is one of the easiest ways to lose in landlord-tenant court — many states allow tenants to recover 2× or 3× the deposit if you mishandle it.
This is a practical reference for the most common state-by-state differences. Treat it as a starting point, not legal advice.
What's regulated, in plain English
State security-deposit law usually addresses four things:
- How much you can charge. Most states cap deposits at 1–2× monthly rent. A few have no cap.
- Where you have to hold it. Some states require a separate trust account (no commingling with operating funds). Some require an interest-bearing account.
- When you have to return it. Most states require return within 14–30 days of move-out, with an itemized statement of any deductions.
- What you can deduct. Damages beyond normal wear and tear, unpaid rent, unpaid utilities (sometimes). What you cannot deduct: ordinary wear, repainting after 2+ years of tenancy, normal carpet cleaning in most states.
State summary table
| State | Deposit cap | Trust account required | Interest required | Return deadline |
|---|---|---|---|---|
| California | 2× rent (unfurnished) | No | No | 21 days |
| New York | 1× rent | Yes, separate | Yes if >5 units | 14 days |
| New Jersey | 1.5× rent | Yes, separate | Yes | 30 days |
| Massachusetts | 1× rent | Yes, separate | Yes | 30 days |
| Illinois | No cap | Yes if 25+ units | Yes if 25+ units | 30–45 days |
| Connecticut | 2× rent (1× if 62+) | Yes | Yes | 30 days |
| Texas | No cap | No | No | 30 days |
| Florida | No cap | Yes, separate | If interest-bearing acct | 15–60 days |
| Washington | No cap | Yes, separate | No | 30 days |
| Oregon | No cap | No | No | 31 days |
Always confirm against your state's current statute — laws change. This table reflects June 2026.
The "trust account" question — what it actually means
In states that require a trust account, you can't deposit security deposits into your regular business or personal checking account. You need a separate account, often interest-bearing, and you typically have to disclose where it's held to the tenant within 30 days of receiving the deposit.
Why does this exist? Because the deposit is the tenant's money — you're holding it in trust. If your business goes bankrupt, the deposit shouldn't be lumped in with your other assets.
The commingling problem. If you mix deposits into your operating funds (even briefly), you've technically commingled. In strict states, this exposes you to penalties even if the deposit is eventually returned in full. A separate account is cheap insurance.
Return deadlines — and what an itemized statement should include
Most states require you to provide an itemized statement of deductions when you return the (partial) deposit. A good itemized statement includes:
- A copy of the move-in inspection report
- A copy of the move-out inspection report (with photos if possible)
- A line item for each deduction with the amount and reason
- Receipts or estimates for any contracted work (cleaning, repairs)
- The remaining balance being returned
States that allow tenants to sue for 2× or 3× the deposit for non-compliance treat "no itemized statement" as automatic non-compliance — you can return the full deposit on time and still lose because you didn't paper it correctly.
What counts as a deductible damage
The dividing line is "damage beyond normal wear and tear." Common examples:
Generally deductible:
- Holes in the wall larger than a small nail
- Stained or burned carpets (beyond what cleaning fixes)
- Broken appliances (if not from manufacturer defect)
- Pet damage (unless you accepted pet rent / deposit)
- Unpaid rent or fees
- Cost of replacing missing items (keys, smoke detectors, etc.)
Generally NOT deductible:
- Faded paint after 2+ years
- Worn carpet in high-traffic areas after multiple years
- Small nail holes (1 or 2 per wall is usually considered normal)
- Cleaning fees for an already-clean unit
- "Refresh painting" because new tenants are coming
When in doubt, the question to ask is: "Would a reasonable person consider this damage that the tenant caused, beyond the wear any tenant would inflict by living here normally?"
How Rentidge handles deposits
Rentidge lets you charge security deposits per-unit (you set the amount when adding a unit) and collect them either bundled with the move-in payment or as a separate transaction. The held amount is tracked on the tenant record so you always know what you owe back.
The current implementation routes deposits through your standard Stripe Connect account — same as rent. If you're in a strict state that requires a separate trust account (NJ, NY, MA, IL, CT), you should consult counsel about whether this satisfies your jurisdiction's requirements. A dedicated trust-account feature is on the Rentidge roadmap for states that require it.
For deposit returns at move-out, the current workflow is: use Stripe Refunds to send the (possibly partial) deposit back to the tenant's card, and provide your itemized statement separately. An in-app itemized-return workflow is also on the roadmap.
This article is general information, not legal advice. Security deposit law changes frequently and varies by jurisdiction. Consult a real-estate attorney for advice specific to your situation.