A security deposit is a sum of money held in
The rationale behind the court’s decision is that the recipient of the deposit does not enjoy “complete dominion” over the funds and is subject to an express obligation to repay so long as the customer fulfills his or her legal obligations. Additionally, both the timing and the method of refund are largely within the control of the depositing party, as he or she can choose to insist upon repayment in cash or apply the deposit to purchase services. The recipient’s right to retain the funds of the deposit is contingent upon events that are outside of his or her control.
Although the recipient may receive an economic benefit from the deposits – i.e. interest – the prospect that income will be generated provides no ground for taxing the principal. However, any income that the recipient may earn through the use of the deposit money will be taxable.
The security deposits required by many residential
A landlord's deductions from a tenant's security deposit must be reasonable. The landlord may make deductions for missing rent payments and for damages beyond ordinary wear and tear, which is the subject matter's depreciation or deterioration in value by reasonable and ordinary use by the tenant. Examples of non-deductible wear and tear include: paint retouching, minor cleaning, small tack holes, and nicks and scratches. Examples of deductible damages include large or excessive holes in the wall, carpet stains, and broken doors and windows.
If a landlord wrongfully withholds a tenant's security deposit, the tenant may be entitled to additional damages beyond the amount of the security deposit. These may include statutory damages for local consumer collection practices act violations, damages that may total two or three times the value of the deposit (depending on the state), consequential (resulting) damages, interest, and in more rare instances punitive damages.
In the United States of America,