Colorado Security Deposit Law (Ultimate Landlord Guide)

Key Takeaways

1. Deposit limits are strictly capped
   Colorado landlords may charge a security deposit of up to two months’ rent (one month for mobile home parks). Pet deposits are capped at $300, and assistance animals are exempt from pet deposits under federal fair housing laws.
2. Clear rules govern how deposits are handled
   Landlords must provide a receipt for security deposits (especially for cash or money orders). While most landlords can hold deposits in any form, mobile home parks and some cities (like Boulder) require deposits to be held in separate or interest-bearing accounts.
3. Only specific deductions are allowed
   After move-out, landlords may deduct for unpaid rent or utilities, damage beyond normal wear and tear, abandonment losses, excessive cleaning, and other lease-permitted charges—but not for ordinary wear and tear.
4. Timely return is mandatory
   Security deposits must generally be returned within one month after the tenant leaves, along with an itemized statement if any deductions are made. When a property is sold, deposits must either be transferred to the new owner or returned to the tenant.

Colorado security deposit laws are found under the state’s Revised Statutes § 38-12-102. These statutes set out the rules that landlords must follow when requiring security deposits from residents, including the maximum limit, acceptable deductions, and the return deadline.

As a landlord, you have a responsibility to abide by these rules. They are part of the broader CO landlord-tenant laws, which are contained under Title 38 Article 12 of the state’s statutes. Here is a guide by Keyrenter Highlands Ranch on the basics of the Colorado security deposit laws.

A Guide to the Colorado Security Deposit Law

As a landlord, requiring security deposits from residents offers many benefits. You can use it to cover the following after the resident has moved out.

• Unpaid utility bills.
• Costs of restoring the unit to the move-in cleanliness standards.
• Unpaid rent.
• Lost rental income if the resident chooses to abandon the property. 
• Cost of fixing damage exceeding normal wear and tear. 

But with this right comes certain responsibilities. The following are the rules you must keep to stay legally compliant with Colorado security deposit laws:

Maximum Security Deposit Limit

Colorado caps the amount a landlord can ask as a security deposit at two months’ rent. Suppose, for instance, that the monthly rent is $1,500, then the maximum security deposit you could charge is $3,000. Not a dime more!

There is an exception for mobile home parks, though. For these, you can require a security deposit of up to one month’s rent.
Additional Pet Deposits
You could also require additional deposits from residents with pets. The maximum amount is $300. You must handle it according to the same rules as a security deposit.

In addition to the additional pet deposit, you may also charge a monthly pet rent. The maximum amount you could charge is $35 per month or 1.5% of the monthly rent, whichever is greater.

Please note, however, that it’s illegal to collect pet deposits from residents with assistance animals.

This is because assistance animals are covered under the Federal Fair Housing Act (FHA). Other reasonable accommodations you may need to provide the resident with under the act include the following:

• Waive your “no pet” policy.
• Assign a disabled resident an accessible parking space to facilitate easier ingress and egress from their unit.
• Adjust the rent due date to coincide with when the resident gets their disability checks.
• Allow the resident to have a live-in caregiver.

Security Deposit Receipt

After receiving the security deposit, you must provide the resident with a receipt. This is especially required of payments made in person by either cash or money order.
You can provide the receipt electronically. However, you must provide a paper copy upon request by the resident.

Security Deposit Holdings

Under the Colorado security deposit law, there are no requirements for holding residents’ security deposits. You can hold it in whichever form, as long as you make it available after the resident has moved out.

However, if renting out a mobile home, you must place the deposit in a separate trust account. You must also store it separately from other funds.

Local cities and counties may have stricter rules regarding security deposit holdings, though. Currently, the interest rate for 2026 is set at 2.08%. The interest calculation formula is:

Interest Due = Deposit Amount X Rate X (Months of Tenancy)/12. Suppose, for instance, that the security deposit is $2,500 and the lease term is twelve months.

Annual Interest = $2,500 X 0.0208 = $52. After the lease is up and the resident has moved out, you must return the security deposit amount, plus the interest due. From our example above, that would translate to $2,552 before deductions (if any).

Sale of Rental Property

After selling a rental property in Colorado, you must do either of two things. You can transfer the security deposit to the incoming landlord, less any allowable deductions. You must then notify the resident of the new landlord’s name and address. Alternatively, you could just return the funds to the resident, less any acceptable deductions.

Security Deposit Deductions

Under the Colorado security deposit laws, landlords can make the following deductions after the resident has moved out.

• Unpaid rent
• Unpaid utilities
• Cost of fixing damage exceeding normal wear and tear
• Monetary loss suffered after a resident has abandoned the rental unit
• Cost of professionally cleaning the unit if the resident leaves it in a dire state
• Other reasonable deductions permitted under the lease

Deposit Returns in Colorado

In most situations, Colorado landlords have 1 month to return the resident’s security deposit after leaving. If you have made deductions, you must provide the resident with an itemized statement.
Conclusion

These are the security deposit rules landlords must follow in Colorado. There may be more regulations in some cities and counties. As such, make sure to do your due diligence in that regard as well.

Keyrenter Highlands Ranch is a top-notch choice for property management services in Highlands Ranch, CO, and its surrounding areas. You can count on us for reliable and professional full-service rental management solutions. Get in touch to learn more!

Disclaimer: Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.