What Can I Deduct From A Tenant’s Security Deposit?

After a lease ends and the tenant moves out, it’s guaranteed that some amount of work will need to be done to get the property ready to rent again.

This can range anywhere from just a good cleaning to a full-scale rehab project. If it’s the latter, this can take weeks to complete and cost thousands of dollars.

Many landlords are left wondering how much of the security deposit they can use to help cover the costs of getting the property prepped and presentable for a new tenant.

The hard part is determining what damage is considered tenant responsibility, what is normal wear and tear, and how much you can charge for each given item.

Also, how long do you have to complete repairs and return the unused portion of the deposit to the tenant?

Some landlords view the security deposit as a bonus that they get for renting out their property, which they’ll keep no matter what. This is not only unethical, but it can have some serious legal ramifications as well.

All of this is covered under California Civil Code Section 1950.5, but we’ll go ahead and break down California security deposit deductions for you here.

Key Takeaways

• California law clearly defines what landlords can and cannot deduct from a tenant’s security deposit.
  
  

• Security deposits can be used for unpaid rent, excessive damage, and cleaning beyond normal wear and tear.
  
  

• Documentation—photos, videos, and receipts—is crucial for legal compliance.
  
  

• Landlords have 21 days to provide an itemized statement and return the unused deposit.
  
  

• New rules like AB 12 and AB 2801 change how much can be collected and how deductions must be documented.

Security Deposit Limits

Before you get to deducting from a security deposit, it’s important to know how much you can hold as a security deposit in the first place.

California has placed hard limits on this, and they’ve gotten even stricter in recent years. Following the enactment of California AB 12 in July 2024, the maximum amount you can charge for a security deposit is one month’s rent. This applies regardless of whether the unit is furnished or unfurnished.

There are exceptions in place to protect smaller landlords. This exception to the cap applies if:

• The landlord is a natural person, or a company comprised of all natural persons.

• The landlord owns no more than two residential rental properties that together hold no more than four rental units.

Under this exception, the landlord can charge up to 2 months’ rent for a security deposit.

This law exists to prevent landlords from holding an unreasonably high security deposit and then not returning it to the tenant at the end of the lease.

Security Deposit Lease Terms

When you write your lease, it’s important that you don’t characterize the security deposit as “nonrefundable” within the lease terms. This is illegal under California law.

It’s also important that your lease agreement specifically states that the deposit cannot be used as last month’s rent. Allowing the tenant to use the security deposit as last month’s rent can put you in a challenging position if there are extensive tenant-caused damages. It’s a lot easier to deduct from a security deposit than to go after them for more money.

What The Security Deposit Can Be Used For

State law is also unambiguous on this. Landlords can use a tenant’s security deposit for:

• Any unpaid rent

• Repair costs of property damage beyond normal wear and tear

• Any cleaning costs needed to get the rental unit back to the level of cleanliness it was at move-in (most commonly carpet cleaning)

The best way to document the condition of the property at move-in is with pictures or even a video walkthrough. This will make it very easy to compare the condition at move-out with the condition before the tenant lived there.

Normal Wear and Tear vs. Tenant Damage

Many landlords don’t understand what is considered normal wear and tear and what is beyond that.

Normal wear and tear is the average deterioration of a property over its natural lifetime, not caused by neglect or abuse of the property.

California law does not do a very good job of defining normal wear and tear, but HUD does. According to HUD, here are some examples of normal wear and tear vs tenant damage:

Life Expectancies of Rental Features

It is also helpful to know the normal life expectancy of different major items in your rental property. HUD provides examples of this as well:

If any of these items are at or near their life expectancy, landlords shouldn’t charge tenants for repair or replacement regardless of their condition at move-out. These items need to be replaced regularly anyway.

Helping The Tenant Get Their Deposit Back

After a tenant gives you a 30-day notice that they will be vacating the property, you need to notify them of their option for an initial inspection, or as we call it, a pre-move-out inspection.

If the tenant does not respond to this notice or does not want to do it, you don’t have to.

The purpose of this inspection is to walk through the property with the tenant and point out anything beyond normal wear and tear to give them the opportunity to fix it without having it deducted from their deposit.

Once you agree on a day and time to conduct the inspection, you must give a 48-hour written notice before the inspection, unless you both agree to forgo this requirement in writing. This allows the landlord to conduct the inspection whether the tenant is present or not.

Once completed, you should provide the tenant with an itemized list of deductions you plan to make based on the condition of the property. This can cover repairs of anything beyond normal wear and tear or cleaning. The tenant then has the opportunity to take care of these items before they move out.

The Move-Out Inspection

If you plan to deduct from the tenant’s security deposit, you must complete a photo inspection immediately after receiving possession of the property. This photo inspection should be done before you perform any repairs or cleaning, and the purpose is to document the condition that the property was in when the tenant vacated. 

Once the repairs and cleaning have been completed, state law now requires you to take updated photos showing the work that was done. 

The Disposition

After the tenant moves out and you perform any repairs or cleaning, you will need to return the remainder of the deposit to the tenant.

A commonly missed deduction is for unpaid water and trash bills. Be sure to call both the local sanitation company and the local water company to see if the tenant has an outstanding balance because these charges do not follow the tenant like an electric or gas bill, they stay with the property.

You must provide the tenant with an itemized statement and charges incurred for all work over $125, including:

• All charges for materials or supplies are to be accompanied by a copy of the invoice or receipt.

• If you or one of your employees performs the work, provide an explanation of the work performed, the time spent, and the reasonable hourly rate charged.

• If performed by an outside vendor, a copy of the bill, invoice, or receipt from the vendor, as well as their name, address, and phone number.

This must be done within 21 calendar days of the tenant vacating the property.

If it can’t be done within 21 days, you can deduct a good-faith estimate as long as you provide an itemized statement. Within 14 days of completing the work, you must provide the tenant with the actual itemized statement. 

Even if you don’t have a forwarding address, send it to the last known address, which would be your rental property. Keep a copy of the envelope if it gets returned by the post office. This will protect you if you find yourself in small claims court over a deposit dispute.

If you don’t do this, even if the tenant trashed your house, they can sue you for the amount of the deposit plus twice the amount in damages if the judge determines you retained the deposit in bad faith.

Even if you evict a tenant that potentially owes you thousands in unpaid rent, you MUST perform a disposition. There are few things worse than having to give a delinquent tenant their deposit back because you didn’t follow this law.

New Update: AB 2801 and Security Deposit Deductions

This section has been added to update the original article with the latest legal changes affecting California landlords.

Effective April 1, 2025, AB 2801 adds new documentation and evidence requirements for security deposit deductions:

• Move-out photos before repairs or cleaning: Landlords must take photos or video of the property immediately after the tenant vacates, before making any repairs or cleaning.
  
  

• Photos after repairs or cleaning: A second set of photos must be taken once the work is completed.
  
  

• Move-in photos for new tenancies: For leases starting July 1, 2025, landlords must also take photos or video documenting the property’s condition at move-in.
  
  

• Stricter limits on deductions: Deductions can only be made to restore the property to its documented move-in condition, excluding normal wear and tear.
  
  

• Evidence with itemized statements: Any deductions must include an itemized statement supported by before-and-after photos and receipts or invoices.
  
  

Why this matters:
AB 2801 raises the bar for proof. Landlords must have clear visual and written evidence to support deductions or risk forfeiting the right to withhold funds from the deposit.

FAQs About Security Deposit Deductions

1. Can I charge for repainting the entire unit?
Only if the repainting is due to tenant damage beyond normal wear and tear, such as damage, graffiti or unauthorized paint colors.

2. What if the tenant leaves belongings behind?
Reasonable costs to remove and store abandoned items can be deducted, but storage laws also apply.

3. Can I deduct for professional carpet cleaning?
Yes, if the carpet is dirtier than it was at move-in. Routine wear does not qualify.

4. How do I prove damage wasn’t normal wear and tear?
Before-and-after photos, move-in condition reports, and invoices are your best protection.

5. Do these rules apply to all California landlords?
Yes. AB 12 and AB 2801 apply statewide, although small landlord exceptions may still affect deposit limits.

Summing it up

There’s a lot to California Civil Code Section 1950.5, but this article hit on the most essential parts.

If you don’t ever want to have to worry about handling a tenant’s deposit, contact Mesa Properties. Move-in, pre-move out, and move out inspections, as well as deposit dispositions, are just a few of the services that we provide here.

Additional Resources

AB 2801 - Security Deposit Update

11 New Laws for California Landlords In 2025

The In-N-Out Model of Property Management