Wisconsin Security Deposit Laws for 2024 | Deductions, Returns, & Rights

A security deposit is a sum of money that a tenant pays at the start of their tenancy to cover the cost of damages, unpaid utilities, or unpaid rent during the lease period.

If you are a landlord in Wisconsin, you'll need to know what the law says about security deposits. WI Stat § 704.28. is the legislature governing a tenant's security deposit. It details the rules landlords must follow when collecting, holding, and returning these deposits.

This article will provide all the information you need to ensure that you are complying with Wisconsin law.

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Now, let’s dive in. 

Maximum Deposit

The most a landlord can demand from a renter in Wisconsin as a security deposit is uncapped. To be sure there aren't any additional or different laws that apply in your town or city, you must always check with the authorities.

Pet Deposits

According to Wisconsin security deposit laws, the landlord is permitted to request an extra pet deposit. However, those with disabilities who rely on service and emotional support animals have a right to full and fair housing access.

As a result, the landlord cannot discriminate against the renter for having a service animal. Keep in mind that in these cases, the tenant is responsible for covering any costs incurred as a result of the service animal's destruction of the rented property.

Before Collecting

In Wisconsin, a landlord must complete the following five steps before requesting a security deposit from a renter:

• Rental agreement. Offer a copy of the lease contract to the tenant. It should contain the amount the tenant owes as a security deposit.
• Building or housing code violations. Inform the renter of any known breaches of the housing or building codes that have not yet been corrected.
• Habitability. Warn the tenant of any uninhabitable conditions.
• Notifying the tenant whether or not utilities are part of the rent. The landlord is required to explain how the costs for shared and private apartments will be split if there aren't separate utility meters for each.
• Provide written notice of the renter's entitlement to a unit inspection. After moving in, the renter has a maximum of seven days to complete the following:

1. Examine the rental property and let the landlord know if there are any existing damages.
2. The landlord may compel the renter to make a written request for any charges deducted from the previous tenant's security deposit. Within 30 days of the renter's petition or within seven days of informing the prior renter of the deposit reductions, whichever comes first, the landlord must give the renter this list.

Allowed Deductions

Once the rental agreement terminates or the tenant is evicted, the landlord may make certain deductions, as specified by Wisconsin law. This includes:

• Unpaid rent.
• Costs associated with damages that are not regarded as normal wear and tear were brought on by the tenant's failure to uphold their commitments.
• Municipal fines owed by the tenant that have not been paid.
• Unpaid utilities.
• Nonstandard rental provisions as stipulated in the rental agreement.

Landlords in Wisconsin are not permitted to deduct the cost to repair damages or losses that may be considered normal wear and tear.

Normal Wear and Tear

Because Wisconsin security deposit law forbids landlords in the state from making unfair deductions for normal wear and tear, it is important to understand precisely what that means to ensure that you aren't contravening the law.

“Normal wear and tear” is described as degradation resulting from using a rented property as intended to be used and without carelessness, neglect, accidental damage, misuse, or mistreatment of the property or its components by the renter, his or her family members, or their guests.

Tenant damage, on the other hand, is the term used to describe destruction to the leased property brought on by misuse or neglect during the lease term and can have an impact on its utility, value, and regular operation.

Returning Deposit

Wisconsin landlords have up to 21 days to return the portion of the security deposit that is due to the tenant. An itemized statement detailing the deductions that have been made must also be sent to the tenant within 21 days. This period starts either when the leased property is discovered to have been abandoned or on the termination date specified in the lease agreement when the tenant moves out.

It's important to remember that a failure to meet this deadline could result in penalties. The tenant may take them to Small Claims Court and claim reasonable attorney's fees and court costs.

The formal statement must be hand-delivered or mailed to the tenant's forwarding address in order for the landlord to adhere to the return conditions stipulated by law.

Suppose the landlord follows the appropriate return method by mailing the document to the last-known address, and there is no forwarding address given. In that case, they are not responsible for late return-related penalties. The tenant still has other options for getting their security deposit back.

Other Laws

In addition to the laws governing the return of security deposits, there are other regulations you'll need to know about to ensure that you are compliant.

The Security Deposit Receipt

The truth is that in Wisconsin, the tenant must receive a written acknowledgment from the landlord upon the receipt of a security deposit. The type of deposit and the amount paid should both be listed on the receipt.

Moreover, the landlord could retain the check without giving a receipt if the person paid by check and specifies that it will be used as a security deposit unless the renter explicitly requests one.

Interest and Holdings

There are no additional regulations that define where a tenant's security deposit must be held. Wisconsin landlords are also not obligated to provide tenants with interest accrued.

Selling the Rental Property

In the event that the initial landlord chooses to sell or otherwise relinquish ownership of the rental unit, he or she must do one of the following:

• Give the renter the new owner's address and name and transfer the security deposit
• Return the security deposit to the renter and let the new owner know this has been done.

Taxes

Security deposits are not immediately regarded as income after being paid at the start of a lease. They only turn into taxable income after the landlord is no longer required to return them. However, at this time, they might also be eligible for a tax write-off. In the following cases, a security deposit will be considered taxable income:

• The portion of the retained deposit that was not used for overdue rent or surrendered due to a lease violation must be reported as revenue in the year it was allocated.
• Landlords should only count the portion of the security deposit utilized as revenue if the landlord counts the repair costs as expenses. There is no need to report the amount of the deposit held to cover these costs as revenue if the landlord doesn't routinely count them as expenditures.
• The landlord should include the security deposit as revenue when it is collected if the parties have agreed to utilize all or a portion of it as the last month's rent.

Final Thoughts

Running a rental business can be challenging. There are so many laws to consider, and things can quickly get out of hand if you have multiple rental units. Fortunately, you can rely on DoorLoop to help keep your business running smoothly.

Contact us to learn more about our property management software, or book your free demo!