At move-in
- Amount, date, and method received, with a receipt to the tenant.
- Where the deposit is held. Some states require a separate account, and some require you to tell the tenant the bank's name. Check your state's rule and record the account details either way.
- Interest, if required. A number of states and cities require interest on deposits. If yours does, note the rate and how you will calculate and pay it.
- The property's condition. A signed move-in checklist with photos is your baseline for later deductions.
During the tenancy
- Track the deposit in your rent roll (a "deposit held" column) so the figure is always at hand.
- Keep it out of your rent ledger's income side: a deposit you may have to return is not rent income. Record it as money held, not money earned.
- Record any change - for example, an additional pet deposit - the same way as the original: amount, date, method, receipt.
At move-out
- Inspection: a move-out checklist against the move-in record, with photos.
- Every deduction, itemized: what it was for, the amount, and the receipt or invoice that backs it. Ordinary wear is usually not chargeable; what counts is defined by state law.
- The disposition letter: an itemized statement and the remaining refund, sent within your state's deadline. The security deposit return letter guide has the structure.
- Proof of mailing and payment: keep a copy of the letter, the check or transfer record, and proof of when it was sent.
Rules vary by state - check yours
Deadlines for returning a deposit, whether interest is owed, what deductions are allowed, and what the itemized statement must contain are all set by state (and sometimes city) law. For one example of how a state spells it out, see the California Courts guide to security deposits. Look up the equivalent for your state before setting your process. This page is general record-keeping information, not legal advice.
Keep the whole deposit file - receipts, checklists, photos, deduction invoices, the letter, and proof of mailing - per the retention periods in how long to keep rental records. Deposit disputes can surface after a tenancy ends, and this is the file that answers them.