Landlord Tools
Security Deposit Interest Calculator
Estimate interest owed on a tenant security deposit using simple or compound interest.
Calculation breakdown
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How rental property returns work
When a tenant pays a security deposit, some US states require the landlord to pay interest on that money while it is held. The rules vary widely: a few states mandate interest on all deposits, some only require it for deposits held beyond a certain period or above a certain amount, and many states have no interest requirement at all. Before you use this calculator, confirm whether your state requires interest and what the statutory rate is — the rules change and the calculator is only as accurate as the rate you enter. The two most common calculation methods are simple interest and annual compound interest. Simple interest is linear: the interest owed equals the deposit times the annual rate divided by 100, times the number of years held. It grows by the same amount each year. Compound interest builds on itself: each year the interest is added to the principal, and the next year interest is earned on the new total. The formula is deposit times ((1 + rate/100) raised to the power of years, minus 1). Over long holding periods, compound interest produces a noticeably larger result than simple interest. Which method applies depends on your state law. Some statutes specify simple interest explicitly, others reference a rate without specifying the method, and a few require compound. The calculator lets you choose simple or annual compound so you can match your jurisdiction. Enter the deposit amount, your state's statutory annual interest rate (as a percentage), the number of years the deposit was held, and the method. The total to return is the original deposit plus the interest owed. When a tenant moves out, you owe them the deposit plus accrued interest, minus any lawful deductions for unpaid rent or damages. This calculator helps you estimate the interest portion so there are no surprises at move-out. Always confirm the current rule and rate for your state — many states adjust their rates periodically, and some cities impose additional requirements on top of state law.
Worked example
You hold a tenant security deposit of $2,400 for 3 years. Your state requires interest at a statutory rate of 5% per year.
Simple interest: $2,400 × 5 / 100 × 3 = $2,400 × 0.05 × 3 = $360. Total to return = $2,400 + $360 = $2,760.
Compound interest: $2,400 × ((1 + 0.05)³ − 1) = $2,400 × (1.157625 − 1) = $2,400 × 0.157625 = $378.30. Total to return = $2,400 + $378.30 = $2,778.30. The difference of $18.30 is the interest earned on interest in years 2 and 3. At move-out you owe the tenant the deposit plus the interest amount, minus any lawful deductions.
Frequently asked questions
Do all US states require interest on security deposits?
No. Many states do not require interest on security deposits at all. A handful of states mandate it for all deposits, some only for deposits held beyond a certain period or above a certain amount, and some cities impose additional requirements. Always confirm your state and local rules before calculating or paying interest.
What interest rate should I use?
Use the statutory rate set by your state law, if your state requires interest. Some states specify a fixed percentage, others reference a rate that changes periodically (like a Treasury rate or a published index). The calculator never assumes a rate — you enter the rate that applies to your jurisdiction.
What is the difference between simple and compound interest?
Simple interest grows linearly: the same dollar amount is added each year. Compound interest builds on itself: each year the interest is added to the principal, so you earn interest on interest. Over long holding periods, compound interest produces a larger total. Your state law determines which method applies.
When do I pay the interest to the tenant?
Most states require interest to be paid when the tenant moves out and the deposit is returned, though some require annual interest payments during the tenancy. A few states require interest to be credited toward rent. Check your state statute for the timing and method of payment.
Can I deduct from the interest when the tenant owes money?
Generally, you can apply the same lawful deductions (unpaid rent, damage beyond normal wear and tear) to the deposit and interest together. The total you return is deposit plus interest minus deductions. Some states have specific rules about how deductions interact with interest, so confirm your local requirements.