Maryland Security Deposit Law: Limits, Deadlines & Deductions

The one-month cap after October 2024

The Renters’ Rights and Stabilization Act of 2024 cut the deposit cap from two months’ rent to one, for deposits paid on or after October 1, 2024. If a tenant paid a two-month deposit before that date, the old limit applied when it was collected. Every new deposit since then is capped at one month.

Maryland defines the security deposit broadly. Any money you collect up front to protect yourself against unpaid rent or damage counts, including prepaid last month’s rent and a pet deposit. At $1,600 rent, that’s $1,600 total across all of them. Assistance animals can’t be charged a pet deposit.

Surety bonds and other deposit alternatives are permitted, if you want to offer tenants a lower move-in cost.

Receipt, escrow and the Tenant Bill of Rights

Give the tenant a written receipt for the deposit. The receipt should also tell the tenant about their right to request move-in and move-out inspections. Many Maryland landlords put the receipt language in the lease, which works if the tenant gets a copy.

Hold the deposit in an escrow account at a Maryland financial institution, separate from your own money. The 2024 Act also requires giving tenants the state’s Tenant Bill of Rights, so add it to your lease packet.

The interest rule

Interest is mandatory on deposits of $50 or more. The rate is simple interest at the greater of:

• 1.5% a year, or
• the daily U.S. Treasury yield curve rate for one-year Treasuries, as of the first business day of the year.

Interest accrues at six-month intervals, so a tenant who leaves after 17 months gets interest for two full six-month periods (12 months), not 17. Leases that began before 2015 use a 3% rate instead.

Because the Treasury rate changes, look it up for each year you held the deposit and use the higher figure. If you track several units, a spreadsheet with the deposit date, amount and yearly rate saves you a scramble at move-out. Interest is owed to the tenant even if you apply part of the deposit to damage, so calculate it on the full amount you held before taking deductions.

The 45-day return

Within 45 days after the tenancy ends, return the deposit plus interest, minus deductions, with an itemized list of the damages and the costs you’re charging. Mail it by first-class mail to the tenant’s last known address and keep proof.

Allowed deductions are unpaid rent, damage beyond ordinary wear and tear, and other costs the tenant owes under the lease. Some examples from a Baltimore rowhouse:

• Wear: marble steps worn smooth, faded paint, a radiator valve that sticks with age.
• Damage: a cracked window pane, holes from a mounted TV bracket, a bathroom door off its hinges.
• Owed under the lease: the last half-month of unpaid rent.

A worked example at $1,600 a month

You rent a Baltimore rowhouse for $1,600 and collected a $1,600 deposit on November 1, 2024, receipted and placed in escrow. The tenant moves out October 31, 2026, after 24 months.

Interest: four six-month periods. Assume the 1.5% floor applied both years (check the Treasury rate for each year and use the higher one). Simple interest is $1,600 x 1.5% x 2 years = $48.

Deductions:

• Replace the cracked window pane: $180 (invoice)
• Patch and paint the TV-bracket holes: $140
• Worn marble steps and faded paint: $0, wear and tear

Deductions total $320. The refund is $1,600 plus $48, minus $320, which comes to $1,328. You mail it with the itemized list by December 15, 2026.

The 3x penalty

If you withhold any part of the deposit without a reasonable basis, the tenant can recover up to three times the amount withheld, plus reasonable attorney fees. Late returns and missing itemized lists are the usual triggers. On the example above, an unsupported $320 deduction could turn into $960 plus fees.

The statute is Md. Code, Real Prop. § 8-203. Some counties, including Montgomery and Prince George’s, have their own landlord-tenant rules, so check the county code too. This page is general information, not legal advice. For a contested deduction, talk to a Maryland landlord-tenant attorney. The state’s new Office of Tenant and Landlord Affairs is another place to ask about the rules.