Minnesota Security Deposit Interest Rules

Does Minnesota require interest on security deposits?

Yes. Every Minnesota security deposit accrues 1% simple annual interest under Minn. Stat. § 504B.178, subd. 2. The rate has been fixed at 1% since August 1, 2003, and applies regardless of deposit amount or how long the deposit has been held. There is no $50 threshold and no 6-month minimum-holding period, unlike some other states.

How Minnesota deposit interest is calculated

Simple interest at 1% per year on the actual deposit balance. A $1,500 deposit held 12 months earns $15. A $1,500 deposit held 36 months earns $45. Interest does not compound. Calculate per calendar year of tenancy from the date the deposit was received.

When Minnesota deposit interest must be paid

Minnesota allows the landlord to pay accrued interest either annually during the tenancy or in a lump sum at termination. The choice should be documented in the lease. Most landlords pay at termination as a single line in the deposit reconciliation, since the amounts are small and tracking annual payouts adds operational overhead.

What happens if a Minnesota landlord doesn't pay required interest

The unpaid interest is recoverable by the tenant, and combined with bad-faith withholding of the deposit itself, can trigger punitive damages of up to $500 plus actual damages, attorney fees, and court costs under Minn. Stat. § 504B.178, subd. 7. A small interest amount can become a meaningful liability when combined with the bad-faith penalty.

How to use this calculator

Enter deposit amount and total months held. The calculator returns the 1% simple interest owed at lease termination under Minnesota statute.

Frequently asked questions about Minnesota deposit interest

Does Minnesota require landlords to pay interest on security deposits?

Yes. Minn. Stat. § 504B.178, subd. 2 requires 1% simple annual interest on every security deposit, regardless of size or how long it's been held. The rate has been fixed at 1% since August 1, 2003.

What is the Minnesota deposit interest rate?

1% simple annual interest, fixed by statute. The rate has not changed since August 1, 2003. It applies whether the deposit is $100 or $10,000, and whether the lease is six months or six years.

When must Minnesota deposit interest be paid?

Either annually during the tenancy or in a lump sum at termination, at the landlord's choice. The lease should specify which.

Is there a threshold below which Minnesota deposits don't earn interest?

No. Unlike Ohio (where deposits under $50 are exempt) or some other states, Minnesota applies the 1% rate to every deposit from day one.

What happens if a Minnesota landlord doesn't pay required interest?

The tenant can recover the unpaid interest. If combined with bad-faith withholding of the deposit itself, punitive damages of up to $500 plus actual damages, attorney fees, and court costs apply under Minn. Stat. § 504B.178, subd. 7.