Security Deposit Interest Calculator
Calculate security deposit interest requirements by state. Know your legal obligations, interest rates, payment timing, and avoid costly penalties.
14 States Require Interest Payment
Connecticut, Illinois, Iowa, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, and Virginia require landlords to pay interest on security deposits. Failure to comply can result in 2-3x deposit penalties plus fines.
Deposit Details
✅ This state requires security deposit interest
Maximum allowed: No limit (typically 1.5-2 months)
Your Results
You must pay interest on security deposits
Bank passbook rate
Must hold deposit in separate interest-bearing account
Penalties for non-compliance far exceed the interest owed. Always follow your state's requirements.
Interest Calculation Timeline
Example Calculation
Scenario: $2,000 deposit held for 12 months at 3% annual interest
Monthly accrual: $2,000 × 3% ÷ 12 = $5.00 per month
Total interest (12 months): $5.00 × 12 = $60.00
Amount to return: $2,000 (deposit) + $60 (interest) = $2,060
Compliance Requirements Checklist
✓ Account Requirements
- • Open separate interest-bearing account (if required)
- • Use federally insured bank or savings institution
- • Maintain detailed records of deposits and interest
- • Keep bank statements for audit trail
- • Do not commingle with personal/operating funds
✓ Notification Requirements
- • Provide written notice of bank name and address
- • Disclose interest rate in writing
- • Send annual statements (if required by state)
- • Include interest notification in lease
- • Notify tenant of any account changes
Penalties for Non-Compliance
Common Violations & Penalties
Violations
- ❌ Failure to pay interest when required
- ❌ No written notice to tenant
- ❌ Paying wrong interest rate
- ❌ Late payment of interest
- ❌ No separate account when required
- ❌ Missing documentation
- ❌ Commingling funds
Typical Penalties
- 💰 2-3x deposit amount in damages
- 💰 $500-$5,000 statutory fines per violation
- 💰 Tenant recovers attorney fees
- 💰 Loss of right to keep any deposit
- 💰 Court costs and interest on judgment
- 💰 Bad faith penalties for intentional violations
- 💰 Potential civil lawsuit damages
The cost of non-compliance far exceeds the interest owed. Always follow your state's requirements.
State-Specific Requirements
📍 High-Rate States (5%)
- • Iowa: 5% annually
- • Massachusetts: 5% or actual
- • North Dakota: 5% or market rate
- • Ohio: 5% or actual interest
📍 Moderate-Rate States (1-3%)
- • Connecticut: 1.5% minimum
- • Maryland: 3-4%
- • Minnesota: 1%
- • Pennsylvania: 3%
- • Virginia: 1%
📍 Market-Rate States
- • Illinois: Passbook rate
- • New Hampshire: Passbook rate
- • New Jersey: Market rate
- • New York: Prevailing rate
- • New Mexico: Passbook rate
⚠️ Important: Some cities and counties have additional requirements beyond state law. Always check local ordinances (e.g., San Francisco, Chicago, New York City may have stricter rules).
Best Practices for Compliance
✅ Do This
- • Set up automatic interest calculations and payments
- • Include deposit interest clause in lease agreement
- • Provide written notification within required timeframe
- • Keep detailed records of all deposits and payments
- • Use separate account if required by state
- • Pay interest on time (annual or at move-out)
- • Verify current interest rates annually
- • Consult local attorney for compliance
❌ Don't Do This
- • Assume your state doesn't require interest
- • Skip written notification to tenants
- • Commingle deposits with operating funds
- • Pay interest late or "whenever convenient"
- • Use arbitrary interest rate without checking law
- • Ignore local city/county requirements
- • Fail to document deposit and interest payments
- • Think penalties won't apply to you