Most landlords think a security deposit is theirs to hold until they decide what the tenant owes. The tenant moves out, you walk the property, and you get to the paperwork when you get to it.
I get why. It's your property, and you're the one who has to clean up whatever got left behind. But in Texas, that deposit comes with a deadline, a paperwork requirement, and real penalties, and those penalties land on the landlord when the process slips.
So let's walk through the Texas security deposit rules every DFW landlord should know, from the day you collect the money to the day you send it back.
Texas Doesn't Cap the Amount
Texas law doesn't set a maximum security deposit, and it doesn't require you to pay interest on it or keep it in a separate account. What Chapter 92 of the Texas Property Code does require is accurate records of every deposit you hold (Section 92.106).
No cap doesn't mean you should charge as much as you can. A deposit that's out of line with similar rentals can scare off good applicants and leave your property sitting empty. And if you ask for a larger deposit because of something in a credit or background report, the adverse action notice I covered in how to screen tenants in Texas applies.
The 30-Day Deadline
Under Section 92.103, you must refund the deposit on or before the 30th day after the tenant surrenders the property. Not 30 days after you finish repairs. Not 30 days after you get the contractor's invoice. Thirty days after they're out.
There's one important wrinkle. Under Section 92.107, you don't have to send the refund or the list of deductions until the tenant gives you a written forwarding address. But a tenant who doesn't give one doesn't lose the right to the deposit. It just delays your obligation.
My advice: ask for the forwarding address in writing before move-out, and mark your calendar the day you get the keys back.
What You Can and Can't Deduct
You can deduct for damages and charges the tenant is legally responsible for under the lease or because they broke it. You can't deduct for normal wear and tear.
The Property Code defines normal wear and tear as deterioration from the intended use of the home. It doesn't include damage caused by negligence, carelessness, accident, or abuse by the tenant, their household, or their guests.
In plain English, the difference usually looks like this:
- Likely wear and tear: faded paint, small scuffs, carpet worn down in the hallway after years of walking on it.
- Likely damage: holes in the walls, broken fixtures, pet stains, a burn mark on the countertop.
Real situations aren't always that clean. How old the carpet was and how long the tenant lived there both matter when you decide what's fair to charge.
Itemize Every Deduction
If you keep any part of the deposit, Section 92.104 says you must give the tenant the balance along with a written description and itemized list of all deductions. "Cleaning and repairs: $900" isn't going to cut it. List each item and what it cost.
The one exception is when the tenant owes rent at move-out and there's no dispute about the amount. Even then, I'd send a written accounting anyway. It costs you nothing, and it gives you a clean record.
What Happens If You Get It Wrong
This is the part that catches owners off guard. Under Section 92.109:
- A landlord who wrongfully keeps a deposit in bad faith can owe $100, plus three times the amount wrongfully withheld, plus the tenant's reasonable attorney's fees.
- A landlord who in bad faith fails to provide the itemized list can lose the right to keep any of the deposit, and the right to sue the tenant for damage to the property.
- If you miss the 30-day deadline, the law presumes you acted in bad faith.
- In court, it's on you to prove your deductions were reasonable.
Tenants can file in justice court when the amount is $20,000 or less, often without needing an attorney. So a $600 disagreement can turn into a much bigger bill just because the paperwork went out late.
Tenants Can't Use the Deposit as Last Month's Rent
You'll hear this one a lot: "Just keep my deposit for the last month." Under Section 92.108, a tenant generally can't withhold the last month's rent on the grounds that the deposit will cover it. A tenant who does may owe three times the rent wrongfully withheld, plus your attorney's fees. There's a narrow exception tied to certain repair disputes, so if it comes up, get advice before you act.
Texas law also allows a landlord to offer a monthly fee in place of a deposit, with written notice (Section 92.111). If you're considering that, read the requirements first.
Set Yourself Up at Move-In
A deposit dispute is usually won or lost long before move-out. A few habits go a long way:
- Do a written move-in inspection, signed by the tenant, with dated photos of every room.
- Do the same at move-out, ideally the same day you get the keys.
- Keep invoices and receipts for everything you charge.
- Have your lease spell out move-out notice requirements. If you want advance notice to be a condition of the refund, Section 92.103 says the lease term must be underlined or in conspicuous bold print.
If You Sell the Property
Buying or selling a rented house? Under Section 92.105, the new owner becomes responsible for the deposit when they take title and must give the tenant a signed statement confirming that responsibility and the exact amount. The seller stays on the hook until the buyer has received the deposit or taken on that liability. Make sure deposits are handled at closing, not as an afterthought.
The Bottom Line
Handling a security deposit isn't complicated, but it is unforgiving. Keep good records, know the difference between wear and tear and damage, itemize everything, and get it out within 30 days. A missed deadline is one of those hidden costs of self-managing that nobody plans for.
At The MTS Group, move-in documentation and deposit accounting are part of our property management service for owners across Dallas–Fort Worth.
If you're a landlord in the DFW area and want help handling security deposits the right way, I'd love to chat.
Call or text me directly at 682-448-9607, or request a free rental analysis and find out what your property could rent for.
This article is general information, not legal or tax advice.