Overview
Iowa security deposit laws are governed by the Iowa Uniform Residential Landlord and Tenant Act, Chapter 562A. Iowa has a clear two-month deposit cap, requires trust account storage, and has a unique rule about interest on deposits held longer than 5 years. Security deposit management software can help property managers navigate these requirements efficiently.
Maximum Security Deposit
Under Iowa law, landlords can charge a security deposit that amounts to no more than two months' rent.
- For example, if monthly rent is $1,000, the maximum deposit is $2,000
- The total includes any pet deposit
- Service dogs and emotional support animals are exempt from pet deposits
Return Timeline
Landlords must return the remaining security deposit within 30 days after:
- The tenancy ends, AND
- The landlord receives the tenant's forwarding address
Forwarding Address Requirement
Important: If the tenant fails to provide a forwarding address within one year of the end of the lease, the landlord has the right to keep the entire security deposit.
Itemized Statement Required
Iowa requires landlords to provide a written, itemized statement listing each deduction and explaining why the charge applies. Receipts or invoices are not required beyond this itemized summary.
Interest Requirements
Iowa has conditional interest requirements: (Nebraska follows similar guidelines—see Nebraska security deposit laws.)
Tenancies Under 5 Years
Landlords are not required to pay interest on deposits held for less than 5 years. Any interest earned during this period belongs to the landlord.
Tenancies Over 5 Years
If the tenancy lasts more than 5 years and the deposit is held in an interest-bearing account, the landlord must pay the accrued interest to the tenant.
Storage Requirements
- Deposits must be kept in a separate trust account
- Must be at an insured bank, credit union, or trust company located in Iowa
- Funds must stay separate from the landlord's personal funds
- Iowa does not require landlords to provide receipts or notify tenants about the account used
Allowable Deductions
Landlords may deduct from the security deposit for:
- Unpaid rent
- Damages beyond normal wear and tear
- Unpaid utilities
Normal wear and tear cannot be charged to the tenant.
Penalties for Non-Compliance
Iowa has strong penalties for violations:
Failure to Return on Time
If a landlord fails to return the deposit or provide the itemized statement within 30 days:
- They lose the right to keep any portion of the deposit
Bad Faith Retention
If the landlord keeps the deposit in bad faith:
- Tenant may recover up to two months' rent as punitive damages
- In addition to the wrongfully withheld amount
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. Schedule a demo to see how Passive automates this process.
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.