Security Deposit Interest Calculator
Some states and cities require deposits to earn interest for the tenant. Enter the deposit, the applicable rate, and the months held to see what has accrued, simple or compounded.
Where interest is required, the rate and method come from state or city law: some name a fixed rate, others track bank passbook rates that change each year. Enter the rate that applied over your holding period and confirm the current figure before paying out.
General information for landlords, not legal advice. Statutes change and cities add their own rules; confirm current law where the property sits, or ask a local landlord-tenant attorney.
Where deposit interest is required
A security deposit is the tenant’s money held in trust, and in a minority of states the law says it must earn interest while you hold it. A number of cities layer their own rules on top, sometimes stricter than the state’s. Whether a particular deposit qualifies can turn on the size of the building, the length of the tenancy, or how large the deposit is.
The rate is rarely yours to choose. Some places write a fixed percentage into the statute; others peg the rate to what local banks actually pay on savings, published fresh each year. A few require the deposit to sit in its own escrow account so the interest is real, not notional.
The calculator above handles the arithmetic for any rate and holding period. The table further down lists the states where an interest requirement commonly applies, with the flavor of each rule.
How the interest is calculated
Two conventions cover nearly every rule. Simple interest applies the annual rate to the original deposit for as long as you hold it, in proportion to the months. Yearly compounding credits each full year’s interest to the balance before the next year accrues, so later years earn slightly more.
Over a one-year lease the two methods agree to the penny. The gap only opens in year two and stays small at deposit-sized numbers, but where a statute names a method, the statute wins.
Simple: interest = deposit × annual rate × months ÷ 12
Compounded yearly: each full year’s interest joins the balance first
Example: $2,000.00 at 2% for 24 months = $80.00 simple, $80.80 compounded
A worked example
The tenant at Maple Street Duplex, Unit A paid a $1,800.00 deposit and is moving out after a two-year lease. Local rules require interest at 2% a year. Both methods, worked through:
- Simple: $1,800.00 × 2% = $36.00 a year, × 2 years = $72.00 of interest
- Compounded: year one turns $1,800.00 into $1,836.00; year two applies 2% to that balance, ending at $1,872.72, which is $72.72 of interest
- Refund if nothing is deducted: $1,872.72 with the deposit, or $1,872.00 under the simple method
Paying it out, and booking it
Timing depends on the rule: some places credit interest to the tenant every year, others settle it in one line at move-out alongside the deposit itself. Either way, the deposit was never income and the interest is not an expense of your choosing; both are the tenant’s money passing through your books.
Keep them as separate lines on the ledger: the deposit held, the interest accrued, and any deductions, each dated. When the refund check goes out, those lines should sum to the check exactly. A refund that ties out line by line is the difference between a quiet move-out and a small-claims argument.
Where deposit interest is required
These are the states, plus the District of Columbia, whose laws commonly require interest on residential security deposits, with the flavor of each rule. Chicago, San Francisco, Los Angeles, Santa Monica, and a number of other cities impose their own requirements, sometimes where the state has none.
| State | Applies to | Rate and timing |
|---|---|---|
| Connecticut | All deposits | Deposit index rate set each year by the Banking Commissioner; credited annually |
| District of Columbia | Tenancies of 12+ months | Prevailing statement-savings rate; settled at move-out |
| Florida | Only when the landlord elects an interest-bearing account | 75% of the account’s annualized rate, or 5% simple |
| Illinois | Landlords with 25+ units, deposits held 6+ months | Rate published by the state each year (Chicago sets its own) |
| Iowa | All deposits | Bank-rate interest, but the first five years’ earnings belong to the landlord |
| Maryland | Deposits of $50+, held 6+ months | Greater of 1.5% or the 1-year Treasury yield, simple; settled at lease end |
| Massachusetts | Deposits held one year or more | 5%, or the actual bank rate if less; paid or credited annually |
| Minnesota | All deposits | 1% simple, settled at move-out |
| New Hampshire | Deposits held a year or more | Rate paid by the bank holding the deposit |
| New Jersey | Most rentals (small owner-occupied buildings excepted) | Earnings of the required bank or money-market account, credited annually |
| New Mexico | Annual leases with deposits over one month’s rent | Passbook savings rate, credited annually |
| New York | Buildings of 6+ units | Prevailing rate, less a 1% administrative fee the landlord may keep |
| North Dakota | Tenancies of 9+ months | Rate paid by the financial institution; settled at move-out |
| Ohio | Deposits over $50 or one month’s rent, held 6+ months | 5% per year on the excess above one month’s rent, paid annually |
| Pennsylvania | Deposits held more than 2 years | Bank rate less a 1% fee, credited from the third year on |
Conditions matter: several of these rules turn on building size, deposit size, or how long the tenancy runs, so read the row for your situation, then confirm the current rate.
Reviewed August 2026. Statutes change and cities add their own rules; confirm current law where the property sits before relying on an entry.
Common questions
Do all states require interest on security deposits?
No. Most states have no interest requirement at all. A minority require it statewide, and some cities impose their own rules even where the state does not. Where no law applies, a lease can still promise interest voluntarily, and then the lease controls.
What interest rate do I use?
The rate comes from the applicable law, not from you. Some statutes fix a percentage, while others publish a rate each year pegged to local bank savings rates, which can be well under 1% in some years. Use the published rate for each year you held the deposit, and check the current figure before paying out.
When is the interest paid to the tenant?
It varies: some rules credit interest annually, either as cash or as a rent credit, while others settle everything at move-out with the deposit refund. At move-out, the interest rides along with whatever portion of the deposit is returned after lawful deductions.
Does interest apply to pet deposits or last month’s rent?
Often, but not always. Many rules cover refundable deposits broadly, which sweeps in pet deposits, and a few explicitly cover prepaid last month’s rent as well. Non-refundable fees are generally outside the requirement. The definitions in the local statute decide it.
What happens if interest was owed and never paid?
The cleanest fix is to calculate what accrued and include it in the move-out settlement. Some jurisdictions add penalties for withholding deposit money beyond the deadline, so a small interest balance is not worth the exposure. When in doubt about an old tenancy, a local landlord-tenant attorney is the right call.
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