Overview
Indiana security deposit laws are governed by IN Code § 32-31-3. Indiana has relatively landlord-friendly laws with no state cap on deposit amounts and no interest requirement. However, the law has strict requirements for forwarding address notification and itemized statements. A security deposit compliance platform helps track these requirements automatically.
Maximum Security Deposit
Indiana does not impose a statutory limit on security deposit amounts. The amount is typically set in the lease agreement.
Pet Deposits
Landlords may charge additional pet deposits, limited to 25% of one month's rent.
In practice, most Indiana landlords charge one to two months' rent as a security deposit.
Return Timeline
Under IN Code § 32-31-3-12, landlords must return the security deposit within 45 days after:
- Termination of the rental agreement or lease, AND
- The property is returned to the landlord
Critical: Forwarding Address Requirement
The 45-day deadline only starts once the tenant provides a forwarding address in writing.
If the tenant fails to provide a written forwarding address: (Ohio has comparable requirements—see Ohio security deposit laws.)
- The landlord is not required to send the deposit back
- The landlord is not required to explain why they are keeping it
- The tenant cannot sue to recover the deposit
Required Documentation
If any deductions are made, the landlord must send:
- An itemized statement of damages
- Replacement or repair costs
- A check or money order for any remaining balance
Interest Requirements
Indiana does not require landlords to pay interest on security deposits.
Storage Requirements
Indiana law does not require landlords to:
- Hold deposits in a separate account
- Use an interest-bearing account
- Notify tenants where the deposit is held
Allowable Deductions
Landlords may deduct from the security deposit for:
- Unpaid rent
- Damages beyond normal wear and tear
- Costs to restore the premises to original condition (excluding ordinary wear)
- Other lease violations
Ordinary wear and tear cannot be charged to the tenant.
Penalties for Non-Compliance
If the landlord fails to return the deposit within 45 days after receiving a written forwarding address:
Tenant Remedies
- Tenant can sue for the full deposit
- Plus attorney's fees
- If the landlord misses the deadline, the law presumes there are no damages (except unpaid rent)
Small Claims Court
Tenants can file in small claims court where the rental property is located.
Common Compliance Questions
What counts as "normal wear and tear"?
Normal wear and tear includes minor scuffs on walls, slightly worn carpet in high-traffic areas, small nail holes from hanging pictures, and faded paint from sunlight. It does not include large holes in walls, stained or burned carpet, broken fixtures, or damage from pets. When in doubt, document the condition at move-in with dated photos.
How should I document the unit's condition?
Complete a detailed move-in checklist with the tenant, noting existing damage, appliance conditions, and overall cleanliness. Take timestamped photos or video of every room. At move-out, repeat the process. This documentation protects both parties and makes deduction decisions defensible if disputed. See how Passive works to simplify move-in and move-out documentation.
Can I deduct for unpaid utility bills?
Only if your lease specifically allows it and the utilities are in your name. If utilities are in the tenant's name, contact the utility company directly—they have their own collection processes. Never make unauthorized deductions, even for amounts you believe the tenant owes.