Massachusetts security deposit interest
Massachusetts has the highest statutory deposit interest rate in the country: 5% a year, or the actual rate the bank paid if that is lower, on any security deposit held for a year or more. The same rule applies to a last month’s rent paid in advance. Because few bank accounts pay 5%, the practical rate is usually whatever the escrow account earned, so the calculator lets you enter it.
Print this page for a dated statement showing the rate applied to each year and the statute.
How Massachusetts deposit interest works
The interest is due every year on the anniversary of the tenancy, and the tenant may deduct it from the next rent payment if the landlord does not pay within 30 days of the anniversary. The deposit must sit in a separate interest-bearing account in a Massachusetts bank, and the tenant must receive a receipt naming the bank within 30 days.
The rules in brief
- Interest at 5% or the bank’s rate, whichever is less, once the deposit has been held one year.
- Last month’s rent paid in advance earns interest on the same terms.
- Unpaid anniversary interest can be deducted from the next month’s rent by the tenant.
- Certain deposit violations carry treble damages plus interest, court costs and attorney fees under § 15B(7).
Fixed in statute. Does not change year to year.
Worked examples: one year held
At the current rate, for a deposit paid on 1 January 2025 and returned on 1 January 2026.
| Deposit | Interest-bearing portion | Interest owed |
|---|---|---|
| $1,000.00 | $1,000.00 | $50.00 |
| $1,500.00 | $1,500.00 | $75.00 |
| $2,500.00 | $2,500.00 | $125.00 |
Other Massachusetts deposit rules
- Maximum deposit: 1 month's rent (security deposit); landlord may also collect first month, last month, and lock/key cost but nothing else up front.
- Return deadline: 30 days after termination of occupancy (tenancy at will) or end of the tenancy specified in a written lease; itemized sworn statement of damages required if deductions taken.
- Late fees: No statutory cap on the amount, but no interest or penalty for late rent may be imposed until rent is 30 days overdue (M.G.L. c. 186 § 15B(1)(c)).
Full page: Massachusetts landlord and tenant rules.
Frequently asked questions
Is Massachusetts deposit interest really 5%?
The statute says 5% per year or the lesser amount the bank actually paid. Most escrow accounts pay less than 5%, so the bank rate usually governs; the landlord must be able to show it.
Does the last month’s rent earn interest too?
Yes. Section 15B(2)(a) requires interest on a prepaid last month’s rent at the same 5%-or-bank-rate standard, paid annually.
When is the interest paid?
Each year within 30 days of the anniversary of the tenancy, and at the end of the tenancy within 30 days. If the landlord misses the anniversary payment the tenant may deduct it from the next rent.
What if the landlord did not hold the deposit in a Massachusetts bank?
Failure to deposit it in a separate interest-bearing account, or to give the required receipt, forfeits the landlord’s right to keep any of the deposit and can trigger treble damages.