Work out the interest owed on a deposit you have been holding — simple or annually compounded — and the total you need to return.
The rate is not something this tool can pick for you. Some states set a specific rate, some require the actual rate earned on a designated account, some require no interest at all, and some cities have their own rule. Enter the rate that applies where your property is.
$1,500.00 x 1.50% x 2.00 years = $45.00.
General information only — not legal advice. Deposit interest rules vary by state and city; confirm the requirement that applies to your property.
Interest on a deposit is straightforward arithmetic. The two things that actually cause problems are not knowing whether interest is required where the property is, and treating the deposit as though it were income while you hold it.
The second one compounds quietly. A deposit booked as revenue inflates the year it arrived and creates a hole in the year you return it, and in between your balance sheet does not show a liability you definitely have. If you are ever asked to evidence deposit handling, that is the record you will wish existed.
Find your local rule once, write it into your process, and hold deposits somewhere you can point to. The interest itself is usually small; the penalties for mishandling deposits often are not.
State rules differ sharply, and several cities are stricter than their state. No calculator can pick the rate for you — find your local requirement and enter it.
It is not revenue. Recording it as income overstates profit, understates what you owe, and makes your balance sheet wrong from day one of the tenancy.
Where interest is required, you generally need to show the account, the period, and the calculation. Keeping the deposit traceable is the point, not just paying the right total.
Interest that builds against the liability as time passes is always current. Working it out from scratch at move-out is where errors and disputes come from.
Related: how to record security deposits, prorated rent calculator, and tenant management software.
Rentwelly records deposits as what they are — money you are holding — so your balance sheet is honest from day one.
It depends entirely on where the property is. Some states require interest at a set rate, some require you to pass on the actual interest earned in a designated account, some require nothing, and several cities impose their own rule that is stricter than the state. Check the rule for your specific city and state — this is one of the most locally variable obligations a landlord has.
Usually simple interest: deposit multiplied by the annual rate multiplied by the fraction of a year held. Some jurisdictions require annual compounding, and some require interest to be paid out or credited each year rather than accumulated until move-out. The calculator supports both simple and annually compounded.
Commonly at the end of the tenancy along with the deposit itself, but a number of places require an annual payment or credit against rent instead. Where an annual obligation exists, missing it is a compliance problem even if you eventually pay everything owed.
The deposit is a liability, not income, because you are holding money that belongs to the tenant. Interest that accrues to the tenant increases that liability. Booking a deposit as revenue overstates your profit and understates what you owe, and it is one of the most common bookkeeping errors landlords make.
Penalties in some jurisdictions go well beyond the interest itself, and can include multiples of the deposit. That is a strong argument for finding out your local rule once, writing it down, and holding deposits in an account you can evidence.
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