Does a landlord have to keep security deposits in a separate bank account?
In many states, yes: the law says a deposit is the tenant's money held in trust, and some states also require a separate account, a bank in the state, or interest. Other states let a landlord keep deposits in the general account if they return them on time. The rule is set by state law, and sometimes by city law, so read your state's statute or ask a local attorney before deciding where deposits go.
Why states care where the deposit sits
A security deposit belongs to the tenant until the landlord has a lawful reason to keep part of it. States that want to protect that money say where it must be held, so it is there if the landlord has a loan default, a lawsuit or a sale of the building. A tenant should not lose a deposit because the landlord spent it on a mortgage payment.
The rules do not match from state to state. Some name an account type, some only prohibit mixing the money with the landlord's own, some apply only to larger buildings, and some say nothing about where the money is kept. This page gives examples of different approaches. It is not a list of every state.
Examples of how states differ
These three examples show the range. Statutes change, so open each link to read the current text.
| State | What the statute says, in short |
|---|---|
| New York | General Obligations Law section 7-103: deposits are held in trust and not mixed with the landlord's money; for buildings of six or more family dwelling units, the deposit must go in an interest-bearing account at a bank in New York. See New York deposit rules. |
| Massachusetts | General Laws chapter 186, section 15B: the deposit is held in a separate, interest-bearing account in a bank located in the state, and interest is payable to the tenant at the end of each year of the tenancy. See Massachusetts deposit rules. |
| Florida | Statute 83.49: the landlord chooses one of three options: a separate non-interest-bearing account in a Florida financial institution, a separate interest-bearing account in a Florida financial institution (paying the tenant interest at the rate the statute sets), or a surety bond filed with the county clerk. The landlord must tell the tenant in writing which one, in the lease or within 30 days. That notice step does not apply to a landlord who rents fewer than five units. See Florida's 30-day notice. |
These summaries are short and may omit exceptions. They are not legal advice. Read the statute for your state, and check city rules too.
Find your state's rule in four steps
- Search your state's landlord-tenant statute for "security deposit" on the legislature's own website.
- Look for words like held in trust, separate account, escrow, interest and bank located in this state.
- Check whether the rule changes with building size, as New York's does.
- Check your city or county for extra rules, and confirm with a local attorney if the text is unclear.
A safe practical setup even where it is not required
Even in a state with no account rule, a separate deposit account makes your books easier and protects you from spending money you will owe back. Your books should show deposits as a liability, as explained in security deposit accounting, and the bank balance should cover that liability.
Example a made-up LLC holds deposits of $1,800, $2,000 and $1,500 for three units, a liability of $5,300. Its operating account holds $2,100 and a deposit account holds $5,300. The LLC can read at a glance that $5,300 is not its money, and that only $2,100 is free to spend.
If you hold deposits in a separate account, record each deposit when it arrives, and match the account's balance to the deposits liability every month. Where interest is owed, track it by tenant.
How DoorKeeping handles it
DoorKeeping records deposits held as a liability for each property, next to the property's bank account and its profit and loss. It does not do trust accounting and does not hold money, so where your state requires a separate account, you open and fund it at your own bank. DoorKeeping gives no legal advice and costs $2 per unit per month with $0 in other fees.
Sources
- New York General Obligations Law section 7-103, read Oct 30, 2026
- Massachusetts General Laws chapter 186, section 15B, read Oct 30, 2026
- Florida Statutes 83.49, Deposit money or advance rent, read Oct 30, 2026
Questions
- Can I put security deposits in my operating account?
- In some states yes, if you return them on time. Others require a separate account. Check your state statute, and keep the deposits liability on your books either way.
- Does the tenant get the interest on a deposit?
- Some states require it and some do not. See your state's statute, and read Do landlords pay interest on deposits?.
- Is one account for all my properties allowed?
- That depends on your state and on how the properties are owned. If each property is its own LLC, each LLC's deposits generally belong in that LLC's accounts. Ask your attorney.