Iowa Security Deposit Interest

Iowa security deposit interest: the landlord keeps it for the first 5 years

Iowa is one of the few states where the landlord, not the tenant, owns the interest earned on a security deposit. Under Iowa Code § 562A.12(2), interest earned on the deposit during the first 5 years of a tenancy belongs to the landlord. The statute sets no percentage rate, no minimum threshold and no banking formula for interest.

How Iowa's deposit account rule works

Under § 562A.12(2), the deposit must be held in a federally insured bank, savings and loan association or credit union, and it cannot be commingled with the landlord's personal funds. The account may be interest-bearing, but the statute does not require it to be. If it is, the interest earned in the first 5 years of the tenancy belongs to the landlord.

Why most Iowa tenants will not see deposit interest

Because the first 5 years of interest go to the landlord, a tenancy shorter than 5 years generally produces no interest owed to the tenant. This is very different from states that require interest from day one, such as Minnesota (1%) or Maryland (the greater of 1.5% or the 1-year Treasury yield).

What this calculator does not cover

The calculator shows that no interest is owed to the tenant while the deposit has been held 60 months or less. For longer tenancies it does not calculate an amount, because there is no statutory rate and it has no input for the actual account interest. Confirm how interest after year 5 is treated with the current statute or an Iowa attorney.

Other Iowa deposit rules that matter

Iowa caps the security deposit at two months' rent (§ 562A.12(1)). The landlord must return the deposit, or give the tenant a written, itemized statement of deductions, within 30 days after the tenancy ends and the tenant gives the landlord a forwarding address (§ 562A.12(3)). Missing that deadline can forfeit the landlord's right to withhold (§ 562A.12(4)). Local rules and your lease may add requirements, so check them too.

How to use this calculator

Enter the deposit amount and how long the deposit has been held. The calculator shows whether the first 5 years of tenancy, during which the landlord owns the interest under Iowa Code § 562A.12(2), have passed.

Frequently asked questions about Iowa deposit interest

Does Iowa require landlords to pay interest on security deposits?

Not during the first 5 years. Under Iowa Code § 562A.12(2), interest earned on the deposit in the first 5 years of a tenancy belongs to the landlord. The statute also does not require the deposit account to be interest-bearing, and it sets no percentage rate.

What is the Iowa security deposit interest rate?

There is no statutory rate. Any interest depends on the account the landlord uses, and the landlord keeps what the account earns in the first 5 years of the tenancy.

Can an Iowa landlord put the deposit in a non-interest-bearing account?

Yes. Section 562A.12(2) requires that the deposit be held at a federally insured bank, savings and loan association or credit union and not be commingled with the landlord's own funds. It says the account may be interest-bearing, not that it must be.

What is the maximum security deposit in Iowa?

Two months' rent under Iowa Code § 562A.12(1).

What happens if an Iowa landlord wrongfully keeps the deposit?

Under § 562A.12(7), a landlord who withholds a deposit in bad faith can be liable for actual damages plus punitive damages of up to twice the monthly rent. Section 562A.12(8) also allows court costs and reasonable attorney fees.