Illinois Security Deposit Interest: Who Owes It and How Much

Who owes it

A lessor of residential real property, containing 25 or more units in either a single building or a complex of buildings located on contiguous parcels of real property, who receives a security deposit from a lessee to secure the payment of rent or compensation for damage to property shall pay interest to the lessee computed from the date of the deposit at a rate equal to the interest paid by the largest commercial bank, as measured by total assets, having its main banking premises in this State on minimum deposit passbook savings accounts as of December 31 of the calendar year immediately preceding the inception of the rental agreement on any deposit held by the lessor for more than 6 months. 765 ILCS 715/1

Four conditions, all in that sentence: residential property; 25 or more units in a single building or a complex on contiguous parcels; a security deposit, which the Act does not define; and a deposit held for more than 6 months. The Act does not apply to any deposit made with respect to public housing. A landlord with fewer units owes nothing under state law, but may under a local ordinance (below), and the Return Act’s duties apply to every landlord regardless.

Counting the 25 units

Count the units in one building, or in one complex of buildings standing on parcels that touch. The courts have drawn some of the lines, mostly under the Return Act in the years it had a unit threshold of its own. Forty-eight units in a four-building complex were counted together. Units owned by different owners are not combined, because the Act is penal and strictly construed. Whether buildings on the same street but on separate parcels form a complex is this Act’s own “contiguous parcels” test; the one appellate case to discuss the words decided the Return Act, which has no such clause, and held it limited to one parcel. A condominium owner renting one unit in a 48-unit building was not a lessor of property containing the threshold number of units, under the old Return Act’s shorter wording. And a management company that signs leases as the lessor without disclosing the owner is itself a lessor. The Department of Financial and Professional Regulation’s notices say “consisting of 25 or more units” and drop the building-or-complex words; the Act does not.

The six-month trigger

Interest is “computed from the date of the deposit” on a deposit held “for more than 6 months”. Read together: nothing is owed on a deposit returned at or before six months, and once the deposit has been held longer than that, interest runs from the day it was paid, not from month seven. The agency’s notices and the Attorney General’s fact sheet paraphrase the trigger as “six months or more” or “at least six months”; the Act says more than. At exactly six months nothing is owed.

The rate, and the two figures the State publishes

The rate is fixed by the lease year: the interest the largest commercial bank with its main banking premises in Illinois, measured by total assets, paid on minimum-deposit passbook savings accounts as of December 31 of the year before the rental agreement began. No statute names an agency to report it, but the Department of Financial and Professional Regulation has published the figure each January for two decades, and since the figure for December 31, 2012 that bank has been The Northern Trust Company.

Since January 2016 every notice gives two numbers: an interest rate and an annual percentage yield. For a 2026 lease they are 0.005% and 0.01%. The Act says “a rate equal to the interest paid” and names one figure. Federal disclosure rules define the interest rate as the rate that does not reflect compounding and require the yield to be disclosed rounded to a hundredth of a percent, which is how 0.005% compounding becomes a published yield of 0.01%. No court has decided which figure the Act means. This tool computes at the yield, the higher figure, and shows the rate figure beside it: paying at the yield satisfies either reading, and on a $2,000 deposit it costs about ten cents a year more.

Published rates by lease year

The lease year is the year the rental agreement began; the figure is the bank’s rate on December 31 of the year before. Every row below is the table this site’s calculator uses. Lease years from 2016 link to the State’s own notice; earlier years come from the historical table the Department printed in its 2006 to 2015 notices and give the rate alone, because the notices of those years published no yield.

The 2016 lease year stands out at 0.045%, nine times the years around it; a lease that began in 2016 and has run since earns at that rate for its first year on our reading, and at each renewal year’s rate after that. Before lease year 1997 the Act set a flat 5% until August 20, 1993, when the bank rate replaced it, and we have found no published figure for the lease years 1994 to 1996; whether an agreement that predates the 1993 change keeps the 5% is unsettled, so the calculator declines to compute an agreement that old rather than guess.

When it has to be paid

The lessor shall, within 30 days after the end of each 12 month rental period, pay to the lessee any interest that has accumulated to an amount of $5 or more, by cash or credit to be applied to rent due, except when the lessee is in default under the terms of the lease. The lessor shall pay all interest that has accumulated and remains unpaid, regardless of the amount, upon termination of the tenancy. 765 ILCS 715/2

The $5 is a payment trigger, not a floor: interest accumulates from the date of the deposit, and once the unpaid total reaches $5 at the end of a 12-month rental period, that total is due within 30 days, by cash or credit toward rent, unless the tenant is in default. At the current rates a deposit would have to be enormous to reach $5 in a year, so for most tenancies that began after 2016 nothing is due annually and the whole amount is paid at the end. A 2016 lease, a lease from 2011 or earlier, or a long tenancy can reach it, depending on the deposit, and then the annual duty is live. Whatever remains unpaid, regardless of amount, is due on termination of the tenancy; the Act sets no number of days for that payment, and the safe practice is to pay it with the deposit.

Before 2016 the Act had no $5 rule and no termination sentence; an appellate court held under the old text that paying interest only at move-out did not discharge the annual payments owed during the tenancy, and that cashing the move-out check settled nothing. On our reading the 2016 amendment is not retroactive; no published case has decided it.

If it is not paid

A lessor who willfully fails or refuses to pay the interest, on a circuit court finding of willfulness, is liable for an amount equal to the amount of the security deposit, together with court costs and reasonable attorney fees. One deposit amount, not two (whether once in all or once for each missed year is undecided), and only for willfulness, which the courts read as a purposeful evasion of a known obligation. Paying interest only at move-out by a mistaken procedure was held not willful. A lease stamp making the deposit “net of security deposit interest” was a device to avoid the Act and was willful. A lease clause waiving the interest is void as against public policy, so the duty cannot be signed away at the start of the tenancy. Contrast Chicago, where the ordinance’s two-times damages need no willfulness at all.

City rules on top of the state Act

Several Illinois towns require interest from landlords the state Act does not reach, and where both apply the landlord owes both; paying the higher figure satisfies each, on our reading.

• Chicago. Every landlord covered by the city ordinance, with no unit threshold, on a deposit or prepaid rent held more than six months, from the start of the rental term, at the Comptroller’s rate for the agreement year (0.01% for 2026); two times the deposit plus interest for not paying. The Chicago interest guide has the rate history. (Chicago Mun. Code 5-12-080(c), 5-12-081)
• Oak Park. An older village article requires interest at the state Act’s benchmark in buildings of four or more units, on a deposit held more than six months, paid within 30 days after each 12-month rental period and within 30 days of the end of the lease, with the rate stated in the lease; public housing is excluded. How that older article fits with the Village’s 2021 deposit ordinance is not settled. (Oak Park Village Code 12-6-11; 12-4-1 to 12-4-5)
• Oak Lawn. A fixed 0.01% a year on any residential deposit held more than one year, payable only if the tenant complied with the lease and the landlord’s inspection finds no damage beyond ordinary use; the rule sits in the village’s business-licensing title. The Cook County ordinance also applies in Oak Lawn. (Oak Lawn Village Code 3-1-7-3)
• Urbana. Interest on any deposit of $100 or more held more than six months, no unit threshold, from the date the deposit was paid, at the passbook rate of the largest commercial bank headquartered in Champaign County as of the June 30 before the lease began, paid within 30 days after each 12-month period. Federal banking data point to Busey Bank in Champaign, and no one publishes its June 30 passbook rate, so the tool states the duty and leaves the figure to you: ask the bank. (Urbana City Code 12.5-19, 12.5-20, 12.5-10(a)(8), 12.5-47 to 12.5-49)
• Evanston. No longer. The City struck its interest rule, its interest-bearing account rule and its rate publication effective January 1, 2025; the City’s own 311 page still says Evanston uses Chicago’s rate, and the code does not. (Evanston City Code 5-3-1, 5-3-2, 5-3-5-1)
• Suburban Cook County, Northlake, Mount Prospect. The County ordinance has no interest duty; Northlake requires an interest-bearing account but has no clause paying the interest to the tenant; Mount Prospect’s rule simply repeats the state Act’s.

Brokers and property managers hold deposits in escrow

A landlord who holds their own tenant’s deposit has no state account rule; the local account rules are Chicago’s, Cook County’s, Evanston’s, Northlake’s and Oak Park’s. A licensed broker or property manager who holds it does: the Real Estate License Act treats a tenant’s deposit as escrow money unless the holder is also the sole owner of the property, requires it to be kept in a separate account, and bars commingling. That account must be non-interest-bearing unless interest is otherwise required by law, as it is under Chicago’s ordinance or this Act, or the parties require it in writing. It is a licensing rule enforced by the State against the licensee, not a tenant remedy.

"Escrow moneys" includes, without limitation, earnest moneys and security deposits, except those security deposits in which the person holding the security deposit is also the sole owner of the property being leased and for which the security deposit is being held. 225 ILCS 454/1-10

Work out an Illinois return

The free Illinois deposit tool asks whether you hold 25 or more units, takes the deposit, agreement and renewal dates, applies each lease year’s rate, shows both published figures, lists any annual payment that fell due, and applies the Chicago, Oak Park and Oak Lawn rules where they reach. It also handles the rest of the return: the 30-day statement, the 45-day refund, the local clocks, and a statute-cited return letter.

Illinois security deposit interest: common questions

Do landlords have to pay interest on security deposits in Illinois?

Only some. The Security Deposit Interest Act reaches a landlord of residential property containing 25 or more units in a single building or in a complex of buildings on contiguous parcels, on a deposit held more than 6 months. A landlord below that size owes no interest under state law, but may under a local ordinance: Chicago requires it from every landlord its ordinance covers, Oak Park in buildings of four or more units, Oak Lawn on any deposit held more than a year, and Urbana on any deposit of $100 or more held more than six months. Public housing is outside the Act. (765 ILCS 715/1, 715/3)

What is the Illinois security deposit interest rate for 2026?

For a lease that began in 2026, the Department of Financial and Professional Regulation reports that the largest Illinois-headquartered bank paid 0.005% on minimum-deposit passbook savings as of December 31, 2025, with an annual percentage yield of 0.01%. The Act says "a rate equal to the interest paid" and names one figure; no court has decided which of the two it means. This tool computes at the yield, the higher figure, and shows the rate figure beside it. On a $2,000 deposit the difference is about ten cents a year. (765 ILCS 715/1)

How is Illinois security deposit interest calculated?

Simple interest on the deposit from the date it was paid, at the rate for the year the rental agreement began, once the deposit has been held more than 6 months. The rate is fixed by the lease year: it is the figure the largest Illinois-headquartered bank paid on minimum-deposit passbook savings on December 31 of the year before the lease began, as the Department of Financial and Professional Regulation reports each January. On our reading, each renewal is a new agreement that takes its own year’s rate. (765 ILCS 715/1)

Does the 25-unit rule count every unit a landlord owns?

No. It counts the units in one building, or in one complex of buildings on contiguous parcels. Units owned by different owners are not added together, and a landlord with 25 units spread across buildings on separate parcels is outside the Act on its text. A property manager who signs leases as the lessor without disclosing the owner can be liable as the lessor. (765 ILCS 715/1; Munroe v. Brower Realty & Management Co., 206 Ill. App. 3d 699 (1990); Kutcher v. Barry Realty, Inc., 362 Ill. App. 3d 756 (2005))

When does the interest have to be paid?

Within 30 days after the end of each 12-month rental period, once the interest that has accumulated reaches $5 or more, by cash or credit applied to rent, except while the tenant is in default under the lease. Everything that has accumulated and remains unpaid, however small, is due when the tenancy ends. At today’s rates most deposits never reach $5 in a year, so in practice the whole amount is usually paid with the refund; a long tenancy, or a 2016 lease at 0.045%, can reach the threshold. (765 ILCS 715/2)

What is the penalty for not paying security deposit interest in Illinois?

A landlord who willfully fails or refuses to pay owes an amount equal to the deposit, plus court costs and reasonable attorney fees, on a circuit court finding of willfulness. One deposit amount, not two; whether it can be recovered once in all or once for each missed 12-month period was expressly left open in Dickson v. West Koke Mill Village Partners, 329 Ill. App. 3d 341 (2002). Willfulness means a purposeful evasion of a known obligation: paying interest only at move-out under a mistaken procedure was held not willful, while a lease stamp making the deposit "net of security deposit interest" was. A lease clause waiving the interest is void. (765 ILCS 715/2; Inendino v. Equity Property Management, LLC, 2022 IL App (2d) 210447; Gittleman v. Create, Inc., 189 Ill. App. 3d 199 (1989); Wang v. Williams, 343 Ill. App. 3d 495 (2003))

Does Evanston still require deposit interest?

No. Evanston struck its deposit-interest rule, its interest-bearing account rule and its rate publication from the City Code effective January 1, 2025. The City’s own 311 page still says Evanston uses Chicago’s rate; the code no longer requires interest. Whether interest that accrued through 2024 remains claimable is not settled. (Evanston City Code 5-3-5-1, as amended by Ord. 52-O-24)

Which Illinois cities require security deposit interest?

Chicago, from every covered landlord, at 0.01% for agreements made in 2026; Oak Park, in buildings of four or more units, at the state benchmark; Oak Lawn, 0.01% a year on a deposit held more than one year, if the tenant complied with the lease, subject to the inspection and damage conditions its code sets; and Urbana, on any deposit of $100 or more held more than six months, at a Champaign County bank rate no one publishes. Suburban Cook County’s ordinance has no interest duty, and Evanston repealed its rule in 2025. We have read ten local codes, nine municipalities and Cook County, and searched 31 more; the rest we have not. (Chicago Mun. Code 5-12-080(c); Oak Park Village Code 12-4-3; Oak Lawn Village Code 3-1-7-3; Urbana City Code 12.5-19)

Sources

• Security Deposit Interest Act, 765 ILCS 715 (Illinois General Assembly)
• 765 ILCS 715/1: who owes interest and at what rate
• 765 ILCS 715/1, 715/2: the annual payment, the $5 rule, termination and the penalty
• IDFPR notice: interest rate for leases beginning in 2026
• IDFPR notice: interest rate for leases beginning in 2025
• IDFPR notice: interest rate for leases beginning in 2024
• Munroe v. Brower Realty & Management Co., 206 Ill. App. 3d 699 (1990); Kutcher v. Barry Realty, Inc., 362 Ill. App. 3d 756 (2005); Hoffman v. Altamore, 352 Ill. App. 3d 246 (2004): counting units
• Inendino v. Equity Property Management, LLC, 2022 IL App (2d) 210447; Gittleman v. Create, Inc., 189 Ill. App. 3d 199 (1989): willfulness
• Wang v. Williams, 343 Ill. App. 3d 495 (2003): a waiver is void
• 225 ILCS 454/1-10, 454/20-20(a)(17), (22): escrow moneys
• Chicago Mun. Code 5-12-080(c); Oak Park Village Code 12-6-11; 12-4-1 to 12-4-5; Oak Lawn Village Code 3-1-7-3; Urbana City Code 12.5-19, 12.5-20, 12.5-10(a)(8), 12.5-47 to 12.5-49; Evanston City Code 5-3-1, 5-3-2, 5-3-5-1
• The Illinois security deposit tool and full cited rules

About this page

Every quoted passage above is the wording of the Illinois Compiled Statutes as the General Assembly publishes it, and the rates are the figures in the Department of Financial and Professional Regulation’s own notices, eight of them re-fetched live when this page was built. The statute and the current notice are on this site’s weekly watch; the city codes are re-read by hand. How we verify the law explains the process. This is general information that cites the law, not legal advice, and Orygn LLC is not a law firm. For advice about your situation, talk to a licensed Illinois attorney.