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Security deposits and move-in costs: a landlord's guide
What to collect at move-in, how to calculate it, how deposits are taxed, and how a few states limit deposit amounts and return deadlines. Always check your own state and city rules.
Updated October 2026. General information for US landlords, not tax or legal advice.
Typical move-in costs
| Item | Typical | Notes |
|---|---|---|
| First month's rent | 1 month | Or prorated rent if the tenant moves in mid-month |
| Security deposit | Often 1 month | Many states cap it, and some cities add rules |
| Pet deposit or fee | Varies | Not allowed for assistance animals under fair housing rules |
| Last month's rent | Sometimes | Taxable as advance rent when received; counts toward deposit caps in some states |
| Application or screening fee | Varies | Some states cap it or require it to match actual cost |
Worked example
Rent is $1,600 and the tenant moves in on September 20 (a 30-day month). Prorated rent for the 20th through the 30th is 11 days × $53.33 = $586.67 (prorated rent calculator). Add a $1,600 deposit and a $300 pet deposit, and move-in funds total $2,486.67. October rent is then due in full on October 1.
Deposit limits and return deadlines: examples
| State | Deposit limit | Return deadline | Statute |
|---|---|---|---|
| California | 1 month's rent for most landlords from July 1, 2024 (2 months for certain small landlords) | 21 days | Civ. Code §1950.5 |
| New York | 1 month's rent | 14 days, with an itemized statement | Gen. Oblig. Law §7-108 |
| Texas | No statutory cap | 30 days after surrender | Prop. Code §92.103 |
| Florida | No statutory cap | 15 days if no claim; 30 days to give written notice of a claim | Stat. §83.49 |
| Massachusetts | 1 month's rent; strict holding and receipt rules | 30 days | G.L. c.186 §15B |
Laws change and cities can add rules (for example, interest on deposits). Check the current statute or a local attorney before you set your policy.
How deposits are taxed
- A deposit you plan to return is not income when you receive it.
- If you keep part of it for damage or unpaid rent, the amount kept is income in the year you keep it. If the damage repair is also deducted, the two offset.
- A "deposit" that will be applied to the final month's rent is advance rent and is income when received (Pub 527).
Protect yourself (and your tenant)
- Do a move-in inspection with dated photos or video, signed by the tenant.
- Keep deposits in a separate account, or in the account your state requires.
- At move-out, compare against the move-in record. Normal wear and tear isn't damage.
- Send an itemized list of deductions with receipts before your state's deadline.
Screening tenants? The rent-to-income calculator applies the common 3× rule. The Rental Property Tracker records deposits separately from rent, so they don't inflate your Schedule E income.
FAQ
Is a security deposit taxable income?
Not when received, if you intend to return it. Any part you keep becomes income in that year. A deposit to be used as the last month's rent is advance rent and taxable when received (IRS Pub 527).
How much can a landlord charge for a security deposit?
It depends on the state. Some cap it at one month's rent (New York, Massachusetts and, for most landlords, California); others, such as Texas and Florida, have no statutory cap. Check local rules too.
Can I charge a pet deposit for a service animal?
Generally no. Under fair housing rules, assistance animals aren't pets, so pet deposits and fees don't apply, though tenants remain liable for damage.