Colorado Security Deposit Law: Limits, Deadlines & Deductions

The deposit is the tenant’s money now

The biggest change for Colorado landlords is about who owns the money. Under HB25-1249, effective January 1, 2026, a security deposit is the tenant’s property. You hold it as a fiduciary, which means you’re looking after someone else’s funds and can take from it only for reasons the law allows.

In practice that pushes you toward habits that good landlords already had: keep deposits in a separate account, keep a ledger per tenant, and treat every deduction as something you may have to prove.

The 2-month cap and what sits under it

Since August 7, 2023, the cap has been two months’ rent under C.R.S. § 38-12-102.5. At $1,600 a month, that’s $3,200.

Pets are handled separately. A 2023 law (HB23-1068) set limits on pet deposits and pet rent, so don’t assume you can stack an unlimited pet deposit on top of two months’ rent. Check the current pet figures before you write them into a lease. Assistance animals are a separate matter under fair housing rules, and you can’t charge a pet deposit for them.

The 2026 fee law (HB25-1090) also matters at signing. You must advertise one total monthly price that includes mandatory fees, and many add-on charges are now banned. Keep the deposit and the rent clearly separate from any fees in the lease.

The 30-day deadline, and when 60 applies

You have 30 days after the lease ends or the tenant surrenders the unit to return the deposit or send a written list of deductions. The lease can set a longer period, up to 60 days, and many Colorado leases do. If yours says nothing, plan on 30.

Send the statement to the tenant’s forwarding address and keep proof of when you mailed it. If the tenant asks for documentation, HB25-1249 gives you 14 days from the request to hand over photos, invoices and receipts.

What you can and can’t deduct

Deductions are limited to unpaid rent and damage the tenant caused beyond normal wear and tear. Two things are now clearly off the table: normal wear and tear, and damage that existed before the tenant moved in.

Some quick calls for a Denver duplex after a two-year lease:

• Sun-faded blinds, light scuffs on walls, worn carpet near the door: wear and tear, no charge.
• A torn window screen from a dog, a cracked bathroom tile from a dropped weight: damage, deductible with a receipt.
• A stain on the kitchen counter that shows up in your move-in photos: pre-existing, no charge.
• Two months of unpaid utilities the lease made the tenant’s responsibility: generally deductible as money owed under the lease.

The pre-existing rule is why the move-in inspection has become the most important document in the file. Walk the unit with the tenant, take dated photos of every room, and have them sign the condition report.

A worked example at $1,600 a month

Your Colorado Springs townhouse rents for $1,600, and you collected $2,400 (one and a half months, under the cap). The lease ends June 30 with no longer return period, so your deadline is July 30.

At move-out you find:

• A carpet burn in the living room, not in the move-in photos. Patch repair: $260.
• A dent in the refrigerator door that is in the move-in photos. $0, pre-existing.
• Rent for the last 7 days of June, unpaid: $368 (a daily rate of $1,600 x 12 / 365, about $52.60, times 7).
• General scuffing in the hallway after two years. $0, wear and tear.

Deductions total $628. You mail a written list with the $260 invoice and the rent calculation, plus a refund of $1,772, by July 30. When the tenant emails on August 4 asking for proof, you have until August 18 to send the photos and the invoice.

The treble-damages risk

Wrongful withholding can bring treble damages (three times the amount wrongly kept) plus attorney fees. Hold back $628 you can’t support and you could be ordered to pay $1,884 plus the tenant’s legal bill. Under SB25-020, the Attorney General and local governments can also enforce landlord-tenant laws, so a deposit complaint doesn’t always stay a private dispute.

The cite is C.R.S. §§ 38-12-102.5 and 38-12-103 as amended by HB25-1249. This page is general information, not legal advice. For a contested deduction, check with a Colorado landlord-tenant attorney.