Glossary
What is a security deposit in property management?
Quick answer
A security deposit is money a resident pays at move-in that the landlord holds to cover unpaid rent or damage beyond normal wear and tear. State law sets the rules, and they vary. In California, the general limit is one month's rent and the landlord has 21 days after move-out to return the deposit with an itemized statement. In Texas, the refund deadline is 30 days after the resident surrenders the unit, as of October 2026.
A security deposit is a refundable amount a resident pays before move-in. The landlord holds it and may deduct unpaid rent and the cost to repair damage beyond normal wear and tear. The landlord returns the rest after move-out.
How security deposits work
State law controls almost every part of a deposit: the maximum amount, where you hold it, whether it earns interest, and how fast you return it. This page is not legal advice. Check your state and city rules before you set a policy.
State | Limit on amount | Return deadline | Other rules |
|---|---|---|---|
California | One month's rent in general. Up to two months for some small landlords, not for service member applicants | 21 days after move-out, with an itemized statement | Photos at move-in for tenancies starting on or after July 1, 2025. Photos after move-out from April 1, 2025. Initial inspection on request |
Texas | See Chapter 92 | On or before the 30th day after the resident surrenders the unit | The forwarding address rule in Section 92.107 can affect the deadline |
Washington | See RCW 59.18 | See RCW 59.18 | A signed and dated move-in checklist is required. Without it, the landlord is liable for the amount of the deposit |
California's small landlord exception applies to natural persons, or LLCs whose members are all natural persons, who own no more than two residential rental properties with no more than four units offered for rent in total.
Property managers often hold deposits in a trust account. Many states treat deposits as resident money, not owner money, so they stay out of the owner distribution.
Example: a California move-out
Rent is $2,400 per month. The landlord is not a small landlord, so the maximum deposit is one month's rent: $2,400.
Item | Amount |
|---|---|
Deposit held | $2,400 |
Cleaning beyond normal use | -$180 |
Carpet repair, burn mark | -$320 |
Refund due | $1,900 |
Deductions total $180 + $320 = $500. The refund is $2,400 - $500 = $1,900. The landlord sends the $1,900 and an itemized statement of the $500 within 21 days. Before and after photos support each deduction.
Related terms
Move-in inspection
Holding deposit
Unit turn
Where software helps
Software tracks each deposit on the lease, holds it in the right account, and starts the refund clock when the resident moves out. When you switch systems, Darcy migrates security deposits with other lease data, and its import batches reconcile to your files' totals to the cent. Darcy's general ledger includes trust accounts. For small portfolios, see software for portfolios under 200 units, or book a demo.
Questions, answered
How much can a landlord charge for a security deposit?
It depends on the state. California's general limit is one month's rent, with an exception for some small landlords. Other states set different limits or none. Check your state law.
Is a security deposit taxable income?
IRS Publication 527 says not to include a security deposit in income when you receive it if you plan to return it. If you keep part or all of it, include the amount you keep in income for that year. Ask a tax professional about your case.
How long does a landlord have to return a security deposit?
The deadline is set by state law. California allows 21 days and Texas allows 30 days after the resident surrenders the unit. Other states use other periods.
Can a landlord deduct for normal wear and tear?
Generally no. Deposits cover unpaid rent and damage beyond normal use. What counts as normal wear depends on state law and the facts, so document the unit's condition at move-in and move-out.
Sources and method
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