Resources · Glossary
What is a security deposit?
A security deposit is money held by a landlord against unpaid rent or damage, subject to caps, holding rules and return deadlines that vary by jurisdiction. It remains the tenant's money until it is properly applied.
| Term | Area |
|---|---|
| Security deposit | Leasing |
| US landlord-tenant laws | Laws |
| Move-ins & move-outs | Modules |
How do security deposits work?
The tenant pays the deposit at the start of the tenancy. Depending on where the property is, the law may cap the amount, require it to be held in a separate or interest-bearing account, require it to be protected in a government-approved scheme, or require interest to be paid.
At move-out the landlord inspects the unit, deducts permitted amounts such as unpaid rent or damage beyond normal wear and tear, and returns the balance with an itemised statement within the legal deadline. In accounting, deposits held are a liability, not income.
See also: US landlord-tenant laws and Move-ins & move-outs.

What does a deposit return look like?
Example (illustrative figures). Deposit held: $1,800. Deductions: carpet cleaning for pet stains $150, one unpaid utility charge $45. Refund: $1,605, sent with an itemised list and photos within the deadline set by local law.

How much can a landlord charge as a security deposit?
It depends on the jurisdiction. Some US states cap deposits at one or two months' rent, others have no cap, and countries such as the UK set their own limits. Furnished units, pets and tenant age can also affect the cap in some places. Check the local law for the property.
What can be deducted from a security deposit?
Generally unpaid rent, other charges owed under the lease, and the cost of repairing damage beyond normal wear and tear. Routine cleaning and ordinary ageing usually cannot be charged. Most laws require an itemised statement, and some require receipts or photos.
Is a security deposit income for the landlord?
No. A deposit is held for the tenant and recorded as a liability. It becomes income only when it is applied to an amount the tenant owes. Keeping deposits separate in the books makes move-out settlements and audits simpler. Many jurisdictions also set rules on where deposits are held and how quickly they must be returned.
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