So I'll link the law below for anyone who isn't in MD but pretty much you're required to keep security deposits in an interest accruing account at 1.5%, then interest is returned with the initial deposit to the tenant (if I'm interpreting this correctly). I was thinking I could use a high yield savings account or a certificate of deposit? I'm just unsure if I can avoid being taxed on the interest as it builds up in the account? I'm going to be new to landlording and I just want to make sure I'm using the right types of accounts.

Bank Account: The landlord must keep all security deposits in federally insured financial institutions that do business in Maryland. The account must be exclusively for security deposits and bear interest. The landlord can also hold the security deposits as insured certificates of deposit. The landlord must deposit each security deposit in that account within 30 days after receiving it. If the landlord owes any person money, that person cannot use the security deposit to be repaid.

Read the Law: Md. Code, Real Property § 8-203; Financial Institutions § 1-101

Return of the Deposit to Tenant; Interest: The landlord must, within 45 days after the end of the rental period, return to the tenant the security deposit minus any amount which the landlord may rightfully keep. Simple interest of the greater of the US Treasury yield curve rate or 1.5% per year must be paid on security deposits of $50 or more and must accrue each month from the day the security deposit was given, after the security deposit has been held for 6 months. A security deposit calculator is available at the website of the Department of Housing & Community Development.

Interest is not compounded.

If the landlord, without a reasonable basis, fails to return any part of the security deposit within 45 days after the end of the rental period, the landlord may be liable to the tenant for three times the withheld amount, plus reasonable attorney’s fees.

Read the Law: Md. Code, Real Property § 8-203

Baltimore, Maryland

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