Security Deposits: What Landlords Can and Can’t Deduct – A 15-Point Practical Guide

Security deposit disputes are probably the most common conflict between landlords and tenants. I know plenty of landlord friends who thought they were being perfectly reasonable when they withheld money, only to end up in front of the tenancy board—and ended up paying the tenant instead. Honestly, most of these issues aren’t about who’s right or wrong. They’re about a simple misunderstanding of what landlords are actually allowed to deduct.

Based on my own experience over the years and a few lessons learned the hard way, here’s a practical breakdown of what you can and can’t deduct from a security deposit.

What You Can Deduct

1. Damage beyond normal wear and tear
This is the core of the whole issue. What counts as normal wear and tear? If a tenant lived in the unit for a year or two and there are some minor scuffs on the walls or slightly flattened carpet, that’s normal. But if there’s a hole in the drywall, a door frame chewed up by a dog, or a burn mark on the carpet—that’s damage. You can deduct the repair cost for those.

2. Cleaning costs if the unit isn’t left clean
Tenants are expected to return the unit in the same level of cleanliness as when they moved in. If the kitchen countertops are caked with grease, the oven still has burnt-on food, or the bathroom has mold buildup, you can hire a cleaning service and deduct the cost. But normal dust and everyday grime don’t count—you can’t expect the place to look like a showroom.

3. Unpaid rent and utilities
If the tenant left with outstanding rent or unpaid utility bills that were in their name, you can deduct those amounts. Just make sure you have documentation—verbal claims won’t hold up.

4. Removal of abandoned belongings
If the tenant left behind old furniture, boxes, or general junk, you can deduct the cost of hauling it away. Take photos and keep the receipt.

5. Key and fob replacement
If the tenant doesn’t return all keys or access fobs, you can charge for replacements. This is usually a small amount, but it’s a valid deduction.

What You Cannot Deduct

6. Normal wear and tear
This is where many landlords get into trouble. If a carpet was already five years old and due for replacement anyway, you can’t charge the tenant for a brand-new carpet. The same goes for paint that naturally fades or peels over a few years—that’s the landlord’s responsibility.

7. Your own labor
If you spent a weekend making repairs and decide to charge the tenant $50 per hour for your time, that’s usually not allowed. In most provinces and states, you can only deduct actual out-of-pocket expenses—meaning you need receipts showing you paid someone else.

8. Upgrades
If a basic faucet breaks, you can’t replace it with a high-end designer model and pass the full cost to the tenant. Repairs must be done with comparable materials.

9. Routine maintenance
Things like gutter cleaning, tree trimming, or roof maintenance are the landlord’s responsibility. You can’t deduct these from the deposit.

Common Pitfalls

10. Don’t miss the deadline for returning the deposit
Every state and province has strict deadlines for returning the deposit. In Ontario, it’s 10 days. In British Columbia, it’s 15 days. In California, it’s 21 days. Miss the deadline—even by one day—and the tenant can demand the full deposit back, sometimes even double. I’ve seen this happen to someone, and it was an expensive mistake.

11. Always keep receipts
Saying “I had a handyman fix the wall for $500” isn’t enough. You need invoices, receipts, and records. Tenants have the right to ask for proof. Without documentation, most tenancy boards won’t accept the deduction.

12. Move-in and move-out inspections are critical
A lot of disputes happen because there’s no inspection record. Do a condition report when the tenant moves in, take photos, and have them sign it. Do the same when they move out. With that report in hand, tenants can’t argue about what was there before they moved in.

13. Security deposits are not penalties
Some landlords think that if a tenant broke the lease, they can keep the deposit as punishment. That’s not legal in most places. The deposit is for damages and unpaid rent—not a fine. If a tenant leaves early, that’s handled through the lease’s early termination clause.

14. Local laws vary widely
In California, landlords can charge up to two months’ rent as a security deposit. In New York, it’s one month. Texas doesn’t have a state-mandated cap, but the amount must be “reasonable.” Canadian provinces also differ. Always check your local rules before writing a lease.

15. Do a final walkthrough with the tenant
I always schedule a final walkthrough on move-out day with the tenant present. If there’s damage, I point it out right there and explain what will be deducted. Most tenants appreciate the transparency and will sign off on it, which saves a lot of headaches later. If they’ve already moved out, mail the itemized list and remaining deposit before the deadline.

At the end of the day, security deposits come down to two things: clear terms in the lease and solid documentation. A well-written lease plus a proper inspection process will save you from most disputes down the road.