Ohio Security Deposit Laws

No one wants to have to go through an eviction process, but sometimes it’s the only viable way to end a landlord-tenant dispute. When a renter fails to fulfil their lease obligation, damage the property, or break a lease agreement, it usually affects landlords the most and can lead to financial loss. 

With security deposits, landlords can rely on these charges as a safety net when the above scenarios occur. However, it’s important to note that there are several laws that govern the collection, use, and return of security deposits in Ohio

This article will cover everything landlords need to know about security deposit Ohio, from the maximum allowable amounts to security deposit return. Additionally, we will address common questions about Ohio security deposit law at the end of this article. 

Ohio Security Deposit Law: Overview

Security deposit laws in Ohio are detailed in ORC Section 5321.16.

• Maximum Security Deposit Fee: Landlords in Ohio can set their own security deposit amounts, as there is no state-mandated limit. Local regulations may impose specific caps.
• Pet Deposits: Landlords can charge a pet deposit, but tenants with service animals are exempt unless damage occurs.
• Collecting Security Deposits: Landlords may collect a security deposit at the start of the lease and must manage it according to state rules. It’s recommended to conduct a move-in inspection to document the property's condition.
• Deductions from Security Deposit: Landlords can deduct past-due rent and the cost of damage caused by the tenant not meeting their duties under ORC 5321.05 or the lease. This can include damage beyond normal wear and tear and, where the lease makes the tenant responsible, unpaid utilities or cleaning.
• Return Timeline: Security deposits must be returned within 30 days after the lease ends and the tenant vacates. If deductions are made, landlords must provide written notice and an itemized list of those deductions.
• Holding Deposits: Landlords do not have to keep deposits in a separate account. However, if the tenant stays for six months or more, the landlord must pay 5% interest a year on any part of the deposit above $50 or one month's rent, whichever is greater. This interest is calculated and paid to the tenant each year (ORC 5321.16(A)).
• Tax Implications: Generally, security deposits are not considered taxable income unless forfeited or applied toward rent. Landlords must report any allowable deductions as income.

Maximum Security Deposit Amount In Ohio

Maximum Fee

In Ohio, landlords have the flexibility to set their own security deposit amounts, as there is no state-mandated limit. However, it's essential to recognize that local city and county regulations may impose specific caps on security deposits for residential properties.

Pet Deposit

Ohio's landlord-tenant laws allow for the inclusion of a pet deposit, which serves as an additional security measure to cover potential damages caused by a tenant's pet. Notably, tenants who have disabilities and rely on service dogs or emotional support animals are exempt from this extra charge. 

Nevertheless, if such an animal causes damage to the property, the tenant is responsible for repairing it at their own expense.

Collecting Security Deposits in Ohio

In Ohio, landlords have the right to request a security deposit from tenants at the start of a lease. When it comes to payment methods, landlords can choose the option that works best for both parties involved. 

While managing security deposit collections manually is certainly an option, automating this process can significantly save time and minimize errors. If you want to increase the efficiency of your security deposit collection, consider using an electronic transfer system like Landlord Studios' online rent collection and payments system.

Landlord Studio simplifies online deposit collection, keeps transaction records well organized, and securely stores important documents such as receipts and inspection reports.

Important Tip for Landlords: Before collecting security deposits from tenants, it's crucial to conduct a move-in inspection of the rental property alongside the tenant. This step allows both parties to evaluate and document the property's condition at the beginning of the lease, helping to prevent potential disputes over damages later on.

What Can a Landlord Deduct From a Security Deposit? 

Under ORC Section 5321.16(B), landlords can apply a security deposit to past-due rent and to damages caused by the tenant's failure to meet their obligations under ORC 5321.05 or the rental agreement. Common deductions include:

• Unpaid Utility Bills: If the lease makes the tenant responsible for utilities and they leave bills unpaid that the landlord has to cover, the landlord can deduct those costs.
• Negligent Damage Beyond Normal Wear and Tear: While some wear and tear is expected over time, any damage that goes beyond this standard can be considered negligent. In such cases, landlords can hold tenants accountable and deduct costs from the security deposit to repair the damage.
• Unpaid Rent: If a tenant fails to pay their rent, landlords can deduct the unpaid amount from the security deposit, provided they give written notice of the deduction. Failing to notify tenants about unpaid rent or deductions can lead to complications for landlords.
• Unit Abandonment: If a tenant leaves before the lease ends, the landlord can deduct rent owed under the lease and other losses caused by the breach. The deduction must cover actual losses, not act as a penalty.
• End-of-Tenancy Cleaning: Ohio tenants must keep the unit safe and sanitary (ORC 5321.05(A)(1)). If the unit is left in a condition that breaches this duty or the lease, the landlord can deduct reasonable cleaning costs.

How Long Does a Landlord Have to Return a Deposit in Ohio?

In Ohio, landlords are required to return a security deposit within 30 days after the lease ends and the tenant vacates the property. If any portion of the deposit has been withheld for repairs or other charges, the landlord must provide the tenant with written notice and an itemized list of those deductions.

All relevant documents and notifications should be sent to the forwarding address specified by the tenant. If the tenant does not supply a forwarding address, they may lose the right to recover double damages and attorney fees.

Holding Security Deposits and Paying Interest In Ohio

Ohio landlords do not have to hold a tenant's security deposit in a separate or interest-bearing account. However, if the tenant stays for six months or more, the landlord must pay 5% interest a year on any part of the deposit above $50 or one month's rent, whichever is greater. This interest is calculated and paid to the tenant each year (ORC 5321.16(A)).

Ohio law does not require landlords to keep separate deposit records, but it is good practice to note when you received the deposit, the amount, any interest paid and any deductions. This makes it easier to prepare the itemized written notice of deductions required under ORC 5321.16(B).

It's important for tenants to understand their rights regarding security deposits, including their entitlement to interest on deposits exceeding $50 or one month's rent—whichever is greater—if they have occupied the property for six months or more. 

Taxes and Security Deposit Deductions

When it comes to taxes, the IRS generally does not classify security deposits as taxable income (like rent). This is primarily because landlords are typically required to return these deposits to tenants at the end of a lease.

However, there are specific circumstances under which security deposits may become taxable for landlords. These situations include:

• Forfeiture of the Deposit: If a tenant forfeits their deposit, it becomes taxable income.
• Application Toward Rent: If the deposit is used to cover rent, it is considered taxable.
• Allowable Deductions: If a landlord makes a permissible deduction from the deposit, that amount must be reported as income.

To comply with IRS regulations, landlords must report any of these scenarios as rental income in the year they occur.

It’s important to note that you can simplify your security deposit management and tax filing process by using Landlord Studio. This property management software provides tools to help you effectively manage security deposits while ensuring compliance with tax laws.

Create your free Landlord Studio account today. Streamline your rental property management, from finding new tenants and collecting deposits, to tracking income and filing taxes.

Final Words: Ohio Security Deposit Laws

Some key points in this article include the flexibility in determining deposit amounts, the necessity of conducting move-in inspections, and the obligation to return deposits within 30 days. It is essential for landlords to understand these regulations to ensure compliance, protect their rights, and uphold tenant protections.

For effective management of security deposits and adherence to tax laws, landlords can utilize property management tools like Landlord Studio. Additionally, for further information and legal forms regarding security deposits in Ohio, landlords should consult local housing authorities or legal professionals.

Ohio Landlord Tenant Laws

• Ohio Landlord Tenant Laws: Overview
• Ohio Tenant Screening Laws
• Guide to Rental Applications in Ohio [+Free Template]
• A Guide to Ohio Lease Agreement [+Free Template]
• How Much Can You Raise The Rent in Ohio?
• Ohio Eviction Laws

Ohio Security Deposit Laws: FAQs

What is the security deposit law in Ohio?

Ohio's security deposit regulations are detailed in the Ohio Revised Code Section 5321.16, which outlines the responsibilities of landlords regarding security deposits for rental properties in the state.

How much can a landlord charge for a security deposit in Ohio?

There is no state-mandated maximum for security deposits in Ohio; instead, the amount is determined by the lease agreement between the landlord and tenant. Generally, security deposits are equivalent to one or two months' rent.

What constitutes normal wear and tear in a rental property in Ohio?

Normal wear and tear refers to the natural deterioration that occurs with regular use of a rental property. Examples include minor scuffs on walls, small nail holes, faded paint, and worn carpets, all of which are considered typical wear and tear in Ohio.

How long does a landlord have to return the security deposit in Ohio?

According to Ohio law, landlords must return any remaining security deposit to tenants within 30 days following the end of the lease.

Can a landlord deduct unpaid rent from the security deposit?

Yes. Ohio landlords can deduct past-due rent from the security deposit, along with any damage caused by the tenant's breach of the lease or legal obligations. Any deductions must be itemized in a written notice to the tenant (ORC 5321.16(B)).

What should you do if your landlord does not return your security deposit in Ohio?

If a landlord improperly withholds a security deposit in violation of Ohio law, tenants have the right to file a lawsuit against them in small claims court.