Indiana's rental security deposit laws aren’t something you can afford to guess your way through. One missed deadline, one wrong deduction, or one unclear clause in the lease, and you could be staring down a court summons or losing money you thought you had protected.
The good news? You don’t need to be a legal expert to get this right. In this guide, we’ll cover everything you need to know about Indiana’s security deposit laws—from what counts as damages beyond normal wear, to how to return a deposit the right way, to what happens when a tenant doesn’t leave a forwarding address.
Landlords across Indiana are losing time and money over issues they didn’t see coming. Don’t be one of them. Read on, get sharp, and make sure your deposit game is as solid as your investment.
A. Maximum Security Deposit Amount: What You Can Charge
There’s no strict maximum security deposit under Indiana rental security deposit law, but that doesn’t mean you can push it too far. In 2025, landlords in Indiana typically charge between 1 and 1.5 times the monthly rent as a deposit.
Charging too much can raise red flags and discourage potential tenants. And remember, a pet deposit is often considered part of the total, so don’t stack fees unless you’ve clearly outlined them in the lease agreement.
B. When Can You Use a Tenant’s Security Deposit?
Under Indiana rental security deposit law, landlords to deduct from the tenant's security deposit for the following reasons:
- Unpaid rent or overdue rent
- Unpaid utility bills or sewer charges
- Damages beyond normal wear
- Cleaning is required to restore the property to move-in condition
- Lease violations under the rental agreement
Important Note: Normal wear and tear is not deductible. Think scuffed walls or faded carpet. But broken windows, missing blinds, or a hole in the wall? That’s beyond normal wear, and it’s fair game.
C. How to Properly Manage Security Deposits
Managing deposits is more than stuffing a check in your desk drawer. A few smart moves will save you from legal risk:
- Keep deposits in a separate account (for your own protection and bookkeeping clarity)
- Document the property’s condition with move-in and move-out photos
- Track rent payments and keep a paper trail
- Use a clear residential rental agreement that outlines deposit expectations and return policies
How and When to Return the Deposit
Indiana rental security deposit law requires landlords to return the security deposit within 45 days after lease termination. Along with the refund, you need to provide:
- An itemized list of deductions
- A check or payment for any remaining amount
- Delivery to the tenant’s forwarding address
If the landlord fails to meet this deadline, the tenant can take you to small claims court, and you could end up paying reasonable attorney’s fees and other damages. It’s not just bad PR—it’s a financial hit.
What Happens When You Get It Wrong
Here’s where it gets real. If you skip any of your responsibilities, such as not sending a written notice, not giving an itemized statement, or not mailing to the tenant’s mailing address, you’re exposed. In fact, according to Indiana Legal Services, tenants may recover the full deposit plus up to twice the amount in damages, and you could also be liable for reasonable attorney’s fees.
D. Local vs. State Law: Know Your Zone
While Indiana rental security deposit law sets the baseline for security deposits across the state, it’s important to remember that Indiana does not have statewide rent control laws. However, some city and county laws may include unique landlord-tenant rules. For instance, in Marion County (home to Indianapolis), rental codes are more aggressively enforced than in smaller towns.
Check local ordinances before applying blanket policies to your rental business.
E. Compliance Tips for Indiana Landlords
Avoiding disputes and legal issues is easier than you think when you follow Indiana rental security deposit law. Stick to these best practices:
- Include clear deposit terms in your lease agreement
- Always perform documented move-in and move-out inspections
- Provide advance notice for inspections and move-out expectations
- Maintain full financial records for each rented property
- Avoid deductions for normal wear
If a tenant leaves without a forwarding address, make a good-faith effort to contact them. Document your attempts—that can save you in a court dispute.
When Disputes Arise
Even the best landlords get pulled into a deposit dispute now and then. Here’s your step-by-step:
- Revisit the rental agreement and lease terms
- Collect your documentation (photos, inspection notes, payment records)
- Try to resolve things directly with the tenant
- If needed, file in small claims court
- Always be prepared to show good-faith efforts
Mistakes That Cost Indiana Landlords Time and Money
Let’s be honest—most legal trouble happens because of simple mistakes. Here are a few common ones:
- Charging an excessive or undefined deposit
- Deducting for things like normal wear
- Failing to send a refund within 45 days
- Skipping the itemized list of deductions
- Not asking for a mailing address
Avoid these, and you’ll save yourself thousands in potential losses.
Say Goodbye to Property Management Hassles and Rely on Experts to Manage Security Deposits for You!
Indiana’s rental security deposit laws can be a minefield for even the most experienced landlord. From knowing what qualifies as normal wear and tear to meeting the strict 45-day deadline for returning a deposit, it’s easy to make a costly mistake.
At PMI Midwest, we specialize in protecting your financial interests while ensuring you stay compliant with all relevant Indiana laws, including Indiana Code Title 32. Our experienced team handles the fine details so you don’t have to juggle legal requirements, paperwork, and tenant communications. We’ve helped hundreds of landlords across Indiana avoid small claims court, keep clean records, and maintain strong tenant relationships.
Here’s how we help Indiana landlords like you:
- Lease drafting and review tailored to Indiana law
- Thorough move-in and move-out inspections
- Security deposit handling and itemized deductions
- Timely and compliant deposit returns
- Legal support for unpaid rent and damages beyond normal wear
- Eviction assistance and court documentation
- Ongoing updates on legal changes and compliance rules
Let PMI Midwest be your partner in smart, compliant property management. If you're tired of second-guessing your lease agreements or stressing over legal deadlines, let us step in. Peace of mind, legal protection, and expert support are just a click away. Schedule a free consultation today!
FAQs
Can landlords in Indiana charge a separate pet deposit?
Yes, landlords in Indiana can charge a separate pet deposit to cover potential damages caused by pets in the rental property. However, this charge cannot be applied to tenants with service animals or emotional support animals, provided they submit valid documentation. This distinction helps landlords protect their property while staying compliant with federal laws that protect tenants with disabilities.
Are landlords in Indiana required to pay interest on security deposits?
No, Indiana law does not require landlords to place security deposits in interest-bearing accounts or pay interest to tenants on these deposits. The landlord’s responsibility is to hold the deposit as financial protection against unpaid rent or damages. After the lease ends, the landlord must return the remaining deposit, minus any lawful deductions, within the state’s required timeframe.
Can landlords deduct cleaning fees from a security deposit in Indiana?
Landlords may deduct cleaning fees from a security deposit only if the tenant leaves the rental unit excessively dirty or damaged beyond normal wear and tear. Standard cleaning after a tenant moves out is considered part of regular maintenance and is not a legitimate deduction from the deposit under Indiana law.
