Glossary

Security deposit

Money held to cover damage or unpaid rent at the end of a tenancy.

Definition

Deposits are held under state-specific rules — separate account, interest bearing, and capped in amount in some places — and must be returned with itemized deductions within a statutory window after move-out.

Example

A one-month deposit is held in a separate account and returned with an itemized statement within the deadline that applies where the property sits.

Why it matters

Deposit handling is one of the few areas where a procedural mistake carries a statutory penalty regardless of who was right about the damage. Many states allow a multiple of the deposit for a wrongful withholding, so the deadline matters as much as the deduction.

How it works in practice

Document condition with dated photos at move-in and move-out. Deduct only for damage beyond normal wear, support each deduction with an invoice or estimate, and send the itemization and the balance together inside the statutory window. Keep the deposit on its own ledger, never as rent income.

Common mistakes

Mixing deposits with operating funds, charging for ordinary wear, deducting without cost support, and missing the return deadline. Deposit caps, account rules, interest, and return deadlines differ by state and sometimes city — confirm the ones that apply to you.

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