How Much Can You Charge?
When you sign on a new tenant in PA, the most you can charge for a security deposit is two months’ rent. That’s it. If the rent is $1,000, you can collect $2,000 max.
But here’s the kicker: once that tenant hits the second year, you’ve got to drop it down to just one month’s rent. Yep, you’ve gotta give the rest back.
And while you can increase the deposit over time if the rent goes up, that stops at year five. After five years, it’s frozen—no more deposit increases, no matter what.
When Should You Collect It?
Before move-in. Every time. No exceptions.
If you absolutely must take the deposit in payments, it needs to be spelled out in the lease. And if they miss a payment? That’s a lease violation. Treat it like unpaid rent and pursue it immediately.
Where Should You Keep It?
DO NOT PUT IT IN YOUR CHECKING ACCOUNT. Seriously. That deposit belongs to the tenant. It’s not income. It’s not your backup fund. It’s their money until it is either returned to them or forfeited to cover unpaid charges after move out.
Put it in a separate account. And by the start of year three of the tenancy, it legally has to be in an interest-bearing account. That’s the rule.
What About Interest?
You’re allowed to keep the first one percent of interest each year to cover admin costs. If the account earns more than that, the extra has to be paid to the tenant every year starting in year three.
If your account earns less than one percent? Lucky you—you keep it all.
What Can You Deduct?
Here’s where landlords get cocky and then get sued.
You can deduct:
Repairs for damage beyond normal wear and tear (with receipts)
Cleaning to return the unit to move-in condition
Unpaid rent
Utility charges the tenant was responsible for
You can’t deduct:
Anything you didn’t actually fix
Damage you can’t prove
Stuff that’s just normal wear and tear
The 30-Day Rule That’ll Burn You
You’ve got 30 days from the day the tenant gives back the keys to:
Return the deposit (or what’s left of it)
Send an itemized list of deductions
If you miss the deadline, you lose the right to keep any of the deposit—even if the tenant left the place in flames. And if they take you to court? You could owe them double. That’s not a threat. That’s the law.
Mark it on your calendar. Set a reminder. Don’t learn this lesson the expensive way.
I’m PM Jen, the—landlord educator, real estate investor, and your favorite straight-talker in the buy-and-hold game. Hold It With PM Jen exists to help real estate investors protect their assets, grow their cash flow, and stop spinning their wheels.
Our mission is simple: help you hold properties smarter, longer, and with way less bullshit. Whether you're new to real estate or knee-deep in it, I’m here to help you hold strong and grow big.