Do Landlords Have to Pay Interest on Security Deposits? Rules by State and City (2026)

The question comes up at both ends of a lease. Landlords holding deposits for several units want to know whether they owe anything beyond the deposit itself. Tenants getting money back after three years want to know whether the check should be bigger. In most of the country the answer is no. In the rest, the rate, the conditions and the payment schedule are all set by statute or ordinance, and getting them wrong can cost a landlord far more than the interest.

Which States Require Interest on Security Deposits?

These are the statewide rules as of October 2026. "Conditional" means the requirement applies only to some rentals, so read the conditions column before assuming it covers yours.

State	Required?	Rate	Conditions and timing
Connecticut	Yes	The state's deposit index: 0.49% for 2026	Paid or credited on each tenancy anniversary. No interest for a month the rent was more than 10 days late, unless a late fee was charged. CGS 47a-21.
Massachusetts	Yes	5%, or the lower rate the bank actually pays	Deposit held in a separate Massachusetts bank account. Paid at the end of each tenancy year. Last month's rent paid in advance earns interest too. G.L. c.186 §15B.
New Jersey	Yes	Whatever the required account earns	Paid yearly in cash or as a rent credit. Owner-occupied buildings with two or fewer rental units are exempt unless the tenant gives 30 days' written notice. N.J.S.A. 46:8-19.
Minnesota	Yes	1% simple	Paid at the end of the tenancy with the deposit. Interest under $1 is excluded. Minn. Stat. 504B.178.
Maryland	Yes	The 1-year Treasury yield on the first business day of the year, or 1.5%, whichever is greater	Deposits of $50 or more held at least six months. Simple interest, paid at the end of the tenancy. Real Prop. §8-203.
North Dakota	Yes	Whatever the insured account earns	Paid at the end of the lease. Not owed if the tenant occupied the unit less than nine months. NDCC 47-16-07.1.
District of Columbia	Yes	At least the holding bank's savings rate, reset each January 1 and July 1	Held in an interest-bearing escrow account in D.C. Paid at the end of the tenancy with the deposit.
New York	Conditional	The bank's rate, minus a landlord fee of 1% of the deposit per year	Buildings with six or more units, and rent-stabilized apartments. The tenant picks yearly payment, rent credit, or payment at lease end. GOL 7-103.
Illinois	Conditional	A rate published each year: 0.01% APY for leases starting in 2026	Landlords with 25 or more units in one building or complex, deposits held more than six months. Paid within 30 days after each 12-month period. 765 ILCS 715.
Ohio	Conditional	5%	Only on the part of the deposit above the greater of $50 or one month's rent, and only if the tenant stays six months or more. Paid yearly. ORC 5321.16.
Pennsylvania	Conditional	What the escrow account earns, minus a 1% per year fee	Deposits over $100 held more than two years, paid yearly on the lease anniversary from then on. 68 P.S. 250.511b.
New Mexico	Conditional	A passbook rate defined by a federal board that no longer exists	Only annual leases with a deposit larger than one month's rent. Paid yearly. NMSA 47-8-18.
Florida	Depends on the account	5% simple, or 75% of the account's rate, if held in an interest-bearing account or bonded	The landlord may use a non-interest account instead, but must tell the tenant in writing how the deposit is held. Fla. Stat. 83.49.

Everywhere else, including California, Texas, Virginia and Iowa, state law does not require the landlord to pay deposit interest to the tenant. That does not settle the question, because cities can and do set their own rules.

Cities With Their Own Interest Rules

City rates change every year, so these are the 2026 figures. A city rule applies on top of state law, which is how a landlord in a state with no interest requirement can still owe it.

City	2026 rate	Who it covers
San Francisco	4.2% (March 1, 2026 to February 28, 2027)	Most rental units, including many exempt from rent control. Simple interest, paid yearly. Nothing owed if the tenant leaves within the first year.
Los Angeles	3.03% (calendar 2026)	Rent-stabilized (RSO) units only, deposits held at least one year. Paid yearly or monthly, in cash or as a rent credit.
Chicago	0.01% (calendar 2026)	Units under the city's landlord-tenant ordinance, deposits held more than six months. Paid within 30 days after each 12-month period.
Berkeley	Published each November	Rent-controlled units. The rent board publishes an annual rate and a monthly move-out rate.
West Hollywood	Published each year	Rent-stabilized units.

Other cities have their own rules, including several in Massachusetts and Illinois, and some well-known ones do not. Santa Monica's rent board, for example, does not require deposit interest. If your city has a rent board or a housing department, its website is the place to check.

How to Calculate Security Deposit Interest

For a fixed annual rate, the math is simple interest:

Interest = deposit × annual rate × years held.

San Francisco. A $3,000 deposit for a full year at 4.2 percent is $3,000 × 0.042 = $126. If the tenant moves out after 18 months, the extra half year is prorated at the rate in effect at move-out.

Massachusetts. A $2,000 deposit held outside a bank, or in an account paying 5 percent or more, earns $2,000 × 0.05 = $100 a year. If the bank pays 2 percent, the tenant gets the 2 percent, $40.

New York. The tenant gets the bank's interest minus the landlord's fee of 1 percent of the deposit per year. On a $3,000 deposit in an account paying 2.5 percent, the account earns $75, the landlord keeps $30, and the tenant is owed $45. When the bank pays less than 1 percent, the fee can absorb the interest entirely.

Ohio. Only the excess counts. With rent of $1,200 and a deposit of $1,800, interest runs on the $600 above one month's rent: $600 × 0.05 = $30 a year.

Three things trip people up. First, the start date: some rules start counting on day one, others only once the deposit has been held six months, a year, or in Pennsylvania two years. Second, partial periods: a tenant who leaves mid-year may be owed a prorated amount, or nothing, depending on the rule. Third, the rate itself: annual city rates change on different dates (San Francisco's on March 1, Los Angeles and Chicago on January 1), so a multi-year deposit can need a different rate for each year.

When Does the Interest Have to Be Paid?

There are two patterns, and the law picks which one applies.

Every year. Connecticut (each tenancy anniversary), Massachusetts (end of each tenancy year), New Jersey, Ohio, Pennsylvania, Illinois, San Francisco, Los Angeles and Chicago all expect payment annually, usually either in cash or as a credit against the next rent. New York lets the tenant choose.

At the end of the tenancy. Minnesota, Maryland, North Dakota and the District of Columbia pay the interest with the returned deposit. That makes it part of the move-out accounting, which has its own deadline. Our guide to security deposit return deadlines by state lists every one.

If You Are the Landlord

• Check the city, not just the state. The biggest surprises are city rules in states with no requirement, like San Francisco and Los Angeles in California.
• Use the right account. Several states dictate where the deposit is held: a separate Massachusetts bank account, a New York bank, a New Jersey institution or money market fund, an escrow account in D.C. Commingling it with your own money is a violation on its own.
• Put the notice in writing. New Jersey, Florida, Connecticut and Chicago all require written disclosure of where the deposit is held or what rate applies. Missing it can carry penalties larger than any interest.
• Calendar the payment. Annual payment dates are easy to forget across several units. Late or missing payments are exactly what tenants and courts look for.

The same tenancies raise the other recurring numbers: what late fee your state allows, a prorated first or last month, and when you can raise the rent.

If You Are the Tenant

Look up your state and city above, then check your lease and any disclosure the landlord gave you at move-in, which in several states must say where the deposit is held. If interest is owed and has not shown up, ask for it in writing: name the law, the period and the amount you calculated. Many rules carry penalties for a landlord who does not pay. Massachusetts allows up to triple damages for several deposit violations, and in New Jersey a tenant whose landlord skipped the required notices can apply the deposit plus 7 percent interest to rent. A local tenant agency or legal aid office can tell you the remedy where you live.

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This article is general information from IROIRO, LLC and not legal advice. Deposit interest rules and rates are set by states and cities and change, some of them every year. Confirm the current rule with your state or city housing agency, or speak with a tenant attorney or legal aid office in your area.

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