California's Security Deposit Limit, and What Actually Counts Toward It

The question comes up almost every time a long-held rental turns over. The last tenant left more damage than the deposit covered, the owner is staring at a repair bill, and he wants to collect more on the next lease so it doesn't happen twice.

The answer is no. It's been no since July 1, 2024, and the rule is written broadly enough that most of the workarounds owners float past me don't survive a close reading either.

Here's what the cap actually says, what counts toward it, and the one narrow exception that lets a small group of owners collect more.

Key takeaways

• California limits a residential security deposit to one month's rent, on top of the first month's rent collected at move-in (Civil Code section 1950.5(c)).
• The furnished-versus-unfurnished distinction is gone. Before July 1, 2024 the ceilings were two months unfurnished and three months furnished.
• The cap reaches security "however denominated," so a pet deposit, a key deposit, a cleaning deposit and prepaid last month's rent all draw from the same one month.
• An owner who is a natural person, or an LLC whose members are all natural persons, and who holds no more than two residential rental properties with no more than four units between them, may collect up to two months.
• That exception never applies when the applicant is a servicemember. One month is the ceiling.
• The 21-day deadline to return the deposit with an itemized statement is unchanged, though as of January 1, 2026 the method of return has changed.

One month. That's the number.

Civil Code section 1950.5(c)(1) says a landlord "shall not demand or receive security, however denominated, in an amount or value in excess of an amount equal to one month's rent, in addition to any rent for the first month paid on or before initial occupancy."

Two things in that sentence carry most of the weight.

The deposit is measured against the rent for that property. On a house renting at $3,200 a month, the ceiling is $3,200. Under the old rule the same unfurnished house would have supported $6,400. That's a real change for anyone who was underwriting turnover risk with a large deposit.

First month's rent sits outside the cap. You can still collect it at or before move-in. What you can't do is stack a second month of rent on top and call it something else.

"However denominated" is the part owners miss

Pet deposit, key deposit, cleaning deposit, move-in fee, redecoration fee. Rename it however you like. If it's collected at the start of the tenancy and it's there to protect you against the tenant's rent or damage, it's security, and it counts against the one month.

Prepaid last month's rent is the one that catches people out. Section 1950.5(b) defines security to include any payment, fee, deposit or charge imposed at the beginning of the tenancy "as an advance payment of rent, used or to be used for any purpose." First month, plus last month, plus a deposit equal to one month puts you over. First month plus one month of security is the shape that works.

The application screening fee is different. That one is governed by section 1950.6 and sits outside the definition of security, so charging it doesn't eat into your month.

There's one further carve-out, and it's narrow. The statute doesn't prohibit an advance payment of not less than six months' rent where the lease term is six months or longer. I rarely see it used on a single-family rental, and it isn't a route to a bigger deposit, because what's being collected there is rent in advance under a long lease. The security ceiling still sits at one month alongside it.

The two-month exception, and who actually qualifies

Section 1950.5(c)(5) lets some small owners collect up to two months' rent. Both halves of the test have to be true at once:

• The landlord is a natural person, or a limited liability company in which all members are natural persons.
• That landlord owns no more than two residential rental properties, which collectively include no more than four dwelling units.

Read the second one slowly, because the counting is cumulative. Two properties, four units, added together. Three single-family rentals puts you outside it. So does a duplex plus a triplex.

The ownership half trips up more owners than the counting half. A house held in a corporation falls outside it. So does an LLC with a trust or another entity among its members, because "all members are natural persons" is doing real work in that sentence.

If you qualify and you intend to collect the second month, write down why you qualify before you collect it. The burden of showing an exception applies falls on the person relying on it.

Servicemembers are capped at one month

Even an owner who clears the small-landlord test can't collect two months from a prospective tenant who is a servicemember. The exception expressly doesn't reach them.

You also can't solve the problem by passing on the application. Declining a servicemember because you'd rather have the larger deposit available from someone else is a separate problem, and a worse one.

What changed on January 1, 2026

AB 414 amended section 1950.5 effective January 1, 2026. It left the cap alone and changed how money comes back at the end:

• Where the tenant paid the deposit or rent electronically, the remainder has to be returned electronically, unless the two of you designated another method by written agreement.
• With several adult tenants on the lease, the refund defaults to a single payment to all of them.
• An agreement to email the itemized statement can be made at any point in the tenancy.

The 21-day clock for returning what's left, with an itemized statement, runs the same as it always has.

If your tenancy started before July 1, 2024

Section 1950.5(c)(6) says the subdivision doesn't apply to security collected or demanded before July 1, 2024. A deposit lawfully taken under the two-month rule in 2023 didn't become unlawful overnight, and you're not required to refund the difference mid-tenancy.

The cap bites at the moment you collect or demand. New tenancy, new deposit, one month.

Renewals are where this gets owners into trouble. If you raise the rent and ask a sitting tenant to top up the deposit to match, that's a demand made today, and today's ceiling is what applies to it. A renewal isn't a path back toward two months.

What actually replaces a bigger deposit

This is where I'd rather owners spend the attention.

A deposit was never much of a risk control. One month of rent doesn't cover a serious repair bill. It didn't cover one when the limit was two months either, and collecting it at move-in does nothing at all about whether the tenant pays in month seven.

Four things do more work than a larger deposit ever did:

Written screening criteria, applied the same way to every applicant. The cap pushes risk management upstream, to the decision about who gets the keys. That's where it belonged anyway. We set the standard in writing before a property is listed, which is how we screen tenants on every file.

Condition documentation at move-in. California now requires photographs of the unit at set points in the tenancy. An owner holding dated photographs is in a far stronger position when a deduction gets questioned, and the deduction is the money that's actually at stake.

Pricing the unit where it will rent. A property priced correctly draws enough applicants that you're choosing among them rather than taking the only one who applied. That decision matters more than the deposit, and it's worth getting the rent figure right from the start.

Maintenance handled quickly, because deferred repairs turn into damage, and damage is what you were hoping the deposit would cover.

Where this leaves you

One month, counted across everything you collect at move-in, with a two-month exception that most owners won't qualify for and that never applies to a servicemember. Those are the operative facts.

California landlord-tenant law moves most years, and the deposit rules have moved twice in three years. If you're holding a lease template or a move-in packet that predates July 1, 2024, it's worth a read before the next tenant signs it.

We manage single-family rentals across Riverside and San Bernardino counties, and the deposit is one line on a longer compliance list we handle on the owner's behalf. If you want a read on what your property should rent for and what it takes to run it correctly, America's Best Property Management can put that together for you.