Your landlord is holding your money. In some states, they're required to earn interest on it and pay it to you. Deposit-handling duties vary by state, so check your state's security deposit statute. Knowing whether your state requires deposit interest determines whether it applies.
Which States Require Security Deposit Interest
Fourteen jurisdictions require a landlord to pay interest on a residential security deposit. Each rule below was read against its statute rather than a summary, and links to the official text. Verified September 11, 2026.
| Jurisdiction | Rate | Who it covers | Statute |
|---|---|---|---|
| Connecticut | 0.49% for 2026 | All residential security deposits. | Conn. Gen. Stat. § 47a-21 |
| District of Columbia | the statement savings rate at the bank holding the deposit | All residential security deposits. The deposit must be held in an interest-bearing escrow account. | D.C. Code § 42-3502.17; 14 DCMR § 311 |
| Illinois | the passbook savings rate at the largest commercial bank in Illinois | Buildings with 25 or more units, on deposits held more than 6 months. | 765 ILCS 715/1 |
| Iowa | none for the first five years — that interest belongs to the landlord | Tenancies running longer than five years. The statute permits, but does not require, an interest-bearing account. | Iowa Code § 562A.12(2) |
| Maryland | the greater of 1.5% a year or the 1-year US Treasury yield | Deposits of $50 or more, held at least 6 months. | Md. Real Prop. § 8-203(e) |
| Massachusetts | 5% a year, or the lesser amount the bank actually paid | Tenancies of one year or longer from the start of the term. | M.G.L. ch. 186, § 15B |
| Minnesota | 1% a year, simple and noncompounded | All residential security deposits, except that any interest amount under $1 is excluded. | Minn. Stat. § 504B.178 |
| New Hampshire | the regular savings rate at the institution holding the deposit | Deposits held for one year or longer. | N.H. Rev. Stat. § 540-A:6 |
| New Jersey | a variable money market rate, reset at least quarterly | Landlords renting 10 or more units must invest the deposit in an insured money market fund or an insured bank account at the variable rate above. Landlords with fewer than 10 units hold the deposit in an account bearing the institution's current savings rate. | N.J.S.A. 46:8-19 |
| New Mexico | the passbook savings rate | Annual rental agreements where the deposit exceeds one month's rent. On agreements shorter than a year the deposit itself may not exceed one month's rent. | N.M. Stat. § 47-8-18 |
| New York | the prevailing rate on similar deposits at local banks | Buildings with six or more family dwelling units. | N.Y. Gen. Oblig. Law § 7-103 |
| North Dakota | whatever the required interest-bearing account earns | Occupancy of nine months or longer. No interest is owed where the period of occupancy was less than nine months. | N.D.C.C. § 47-16-07.1 |
| Ohio | 5% a year | Only the portion of the deposit exceeding $50 or one month's rent, whichever is greater, and only where the tenant stays in possession six months or more. | Ohio Rev. Code § 5321.16 |
| Pennsylvania | whatever the required escrow account earns, less a 1% fee | Deposits over $100, and only after the deposit has been held beyond the second anniversary of the lease. | 68 P.S. § 250.511b |
The rate is not always a fixed number, and that matters. Some states write a fixed percentage into the statute. Some jurisdictions publish an updated deposit interest rate each year; check the issuing agency for the current figure. In several jurisdictions the interest depends on what the deposit account earns; see each statute in the table for the exact rule.
Two commonly repeated claims do not survive the statutes. Iowa is often listed as paying tenants deposit interest; Iowa Code § 562A.12(2) assigns interest earned in the first five years to the landlord. Virginia appears on many such lists too; Va. Code § 55.1-1226 contains no interest provision.
Cities That Require It Where Their State Does Not
State silence is not the end of the question. Some cities handle this by local ordinance, and for a covered renter the local rule may be the one that matters.
| City | Rate | Ordinance | Official rate |
|---|---|---|---|
| Chicago, Illinois | 0.01% for 2026 | Chicago Muni. Code § 5-12-081 | Current rate |
| San Francisco, California | 4.2% for March 1, 2026 through February 28, 2027 | S.F. Admin. Code § 49.2 | Current rate |
| Los Angeles, California | 3.03% for 2026 | L.A. Mun. Code § 151.06.02 | Current rate |
Some other California cities may have their own deposit interest ordinances; check each city's municipal code. A full per-jurisdiction breakdown, each with a calculator preset to its rule, is on security deposit interest by state.
How Interest Is Calculated and When It's Paid
In states with deposit interest requirements, the calculation and payment timing vary. Some states call for annual statements and yearly interest payments or rent credits. Some states tie interest to the rate paid by money market accounts and set a payment schedule, such as yearly. Other states have their own approaches, such as tying interest to a stated rate or to what the deposit account actually earns. The amounts aren't huge on a 1-year lease — $1,500 deposit at 5% is $75 — but on multi-year tenancies with larger deposits, the interest can be meaningful. Remedies for unpaid deposit interest vary by state; check your state's statute for any stated penalties.
Commercial Deposits Often Do Not Earn Interest by Default
State security deposit interest requirements apply almost exclusively to residential leases. Many state deposit-interest statutes are written for residential tenancies, so commercial tenants often need to negotiate interest in the lease; check the statute that applies. However, commercial tenants can negotiate deposit interest provisions directly into their lease. For large commercial deposits — a 6-month deposit on a $15,000/month lease is $90,000 — the interest is significant. At 4%, $90,000 in deposit generates $3,600/year. Over a 5-year lease, that's $18,000 in interest that's the landlord's income unless the lease specifies otherwise. Commonly negotiated: deposit held in a separate interest-bearing account; interest credited to tenant annually; and interest paid to tenant at lease end along with deposit return.
Separate Account Requirements Protect Your Deposit
Beyond interest, some states require landlords to hold security deposits in separate accounts, not commingled with their own funds. Which states do this varies, so check your state's current rules. If a landlord faces bankruptcy, commingled deposits can be harder for tenants to recover, depending on the facts and applicable law. A separate account may offer some protection if a landlord faces financial trouble, though outcomes depend on the facts and local law. For commercial tenants, negotiate a separate account requirement into the lease regardless of state law — a landlord who commingles a large commercial deposit with operating funds provides significantly less security that you'll see your deposit returned.
What to Do If Your Landlord Isn't Paying Required Interest
If your state addresses deposit interest and your landlord has never paid or credited any, that may be worth looking into. First, confirm the requirement applies to your tenancy (check your state statute and any local ordinance). The interest amount depends on the statute's rate, coverage and period, so check the applicable rule before calculating. Some tenants raise unpaid interest with the landlord in writing, and a local attorney can review whether that makes sense. Some states attach penalties to deposit-handling violations, so check your state's statute for any stated consequences. If the landlord doesn't pay, small claims limits and procedures vary by state, so ask a local attorney or check your state court's website about options.
Key Takeaways
- Several states address deposit interest for residential tenants, so check your state's statute
- Deposit interest statutes typically address residential tenancies, so commercial tenants commonly negotiate interest provisions in the lease.
- Separate account requirements protect deposits from landlord bankruptcy — negotiate these into commercial leases
- Check whether your state requires deposit interest and ask a local attorney how unpaid interest is handled
- Large commercial deposits of $50,000+ generate meaningful annual interest — include interest provisions in every commercial lease
Frequently Asked Questions
- How much interest can I earn on my security deposit?
- At statutory rates of 3-5%, a $3,000 deposit over a 3-year tenancy earns $270-$450 in interest. At current higher rates available in money market accounts, interest can be substantially higher.
- What if my landlord put my deposit in a non-interest-bearing account?
- If your state requires an interest-bearing account, the landlord may have violated that requirement. Some states provide remedies for unpaid deposit interest, so ask a local attorney whether any apply. Document the request in writing.
- Can I apply deposit interest to my rent?
- Some state statutes address crediting deposit interest against rent; check your state's statute. Massachusetts explicitly allows this. Timing varies, and in many places the interest is paid at move-out with the deposit return.
- Is the interest paid on a security deposit taxable income?
- Yes. Interest paid to a tenant may be reportable income under IRS rules; see IRS guidance or a tax professional. Landlords should provide a 1099 for interest paid if required by IRS rules. Keep records of interest received.
- What is a 'last month's rent' and does it earn interest?
- Last month's rent is commonly treated as a prepayment, though some states classify it differently, so check your state's statute. Some states treat prepaid last month's rent differently from a security deposit, so check your state's statute.