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Part of Information for landlords and tenants

Annual security deposit interest rate

Interest rate changes to security deposits – January 1 to December 31, 2026.

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Information for landlords and tenants

Overview

Landlords can require a security deposit, sometimes referred to as a damage deposit, from their tenants when they move into rental premises. The Residential Tenancies Act and Mobile Home Sites Tenancies Act direct that landlords pay interest on tenant security deposits based on the prescribed rate in the Security Deposit Interest Rate Regulation. The rate of interest that landlords must pay on tenant security deposits effective January 1, 2026, has dropped back down to 0%.

In 2025, the interest rate to be paid on security deposits was 0.5% and in 2024 it was 1.6% This was the first-time landlords were required to pay interest on security deposits since 2009. The Security Deposit Interest Rate Regulation contains a formula for setting the yearly interest rate payable on security deposits, which takes effect on January 1 of each year. 

The formula takes the interest rate that ATB Financial is charging for a cashable one-year Guaranteed Investment Certificate (GIC) on November 1 of the previous year and subtracts 3 percentage points. Therefore, if this interest rate is 3% or less on November 1 of a given year, the security deposit interest rate for the following year will be 0%.

Additional information about returning security deposits is available at Ending a tenancy.

Interest on security deposits

Any interest on a security deposit that has accumulated when the prescribed interest rate is greater than 0% must be paid to the tenant every year unless the landlord and tenant agree in writing that the interest will be compounded yearly and paid to the tenant at the end of the tenancy. A landlord may agree in a residential tenancy agreement to pay a higher interest rate. The landlord is then bound to pay the tenant interest on the security deposit and the compounding interest at the higher rate.

Interest Rate Calculator

The Alberta government provides an online interest rate calculator to assist landlords and tenants in determining how much interest the landlord must pay on the security deposit.

Interest calculation examples

  • Example 1

    Joe moved into his apartment on July 1, 2025, and gave the landlord $1,000 for a security deposit. Joe vacates the apartment on December 31, 2026. Interest would be payable on the security deposit from July 1, 2025, to December 31, 2025, based on the 2025 security deposit interest rate. No interest would be payable on the security deposit for January 1, 2026, to December 31, 2026, as the interest rate is 0%. Here’s how to calculate the interest owed at the end of the tenancy:

    Step 1

    Determine the interest owed for each full year:

    • In 2025:
      $1,000 x 0.005 = $5 (security deposit amount x interest rate % for 2025 = $5)
    • In 2026:
      $1,000 x 0.0 = $0 (security deposit amount x interest rate % for 2026 = $0)

    Step 2

    Determine the interest owed for each day of a full year in 2025: 

    •  $5/365 = 0.0137 cents per day ($5 divided by number of days in the year = interest owing per day)

    Step 3

    Determine how much interest is owed for the number of days Joe was in the apartment in 2025: 

    • 184 days x 0.0137 cents = $2.52 interest payable (days lived in rental unit x interest owing per day = interest payable for 2025)

    The total interest payable to Joe at the end of the tenancy on December 31, 2026 would be $2.52. The security deposit plus interest would be $1,002.52.

  • Example 2

    Mary moved into an apartment on June 1, 2024, and gave the landlord $1,000 for a security deposit. Mary vacated the apartment on December 31, 2026. Mary and the landlord agreed in writing to pay the security deposit interest at the end of the tenancy. In this case, the interest would be compounded annually.

    To determine the compounded interest, start by going through the same first steps as the previous example:

    Step 1

    Determine the interest owed for each full year: 

    • In 2024: 
      $1,000 x 0.016 = $16 (security deposit amount x interest rate % for 2024 = $16)
    • In 2025:
      $1,000 x 0.005 = $5 (security deposit amount x interest rate % for 2025 = $5)
    • In 2026:
      $1,000 x 0.0 = $0 (security deposit amount x interest rate % for 2026 = $0)

    Step 2

    Determine the interest owed for each day of a full year:

    • In 2024:
      $16/366 = 0.0437 cents per day ($16 divided by number of days in the year (366 leap year) = interest owing per day)
    • In 2025:
      $5/365 =0.0137 cents per day ($5 divided by number of days in the year = interest owing per day)

    Step 3

    Determine how much interest is owed for the number of days Mary was in the apartment:

    • June 1, 2024 to December 31, 2024: 214 x 0.0437 = $9.35 interest owing for 2024
    • January 1, 2025 to December 31, 2025: 365 x 0.0137 = $5.00 interest owing for 2025

    The total interest payable to Mary before compounding would be $14.35. 

  • Additional steps for compounding interest

    Then, to calculate the compounded interest for the balance of the tenancy from June 1, 2025 to December 31, 2026, perform these additional steps:

    Step 1

    Determine the interest owing on May 31, 2025 (1 year into the tenancy):

    • $9.35 + (151 x 0.0137) = 11.42 ($9.35 from 2024 plus $2.07 for January 1, 2025 to May 31, 2025)
      The security deposit plus the interest payable for the first tenancy year from June 1, 2024 to May 31, 2025 would be $1,011.42.

    Step 2

    • $1,011.42 x 0.005 = $5.06 (total security deposit including first tenancy year interest x interest rate % for 2025 = security deposit interest payable for the full year in 2025)

    Step 3

    • $5.06/365 = 0.0139 cents per day ($5.06 divided by number of days in the year = interest owing per day) 

    Step 4

    • 214 days x 0.0139 = $2.97 interest owing (days lived in rental unit during second tenancy year in 2025 when interest rate was greater than 0% x interest owing per day = interest payable for June 1, 2025 to December 31, 2025).

    The total compounded interest payable to Mary at the end of the tenancy on December 31, 2026 would be $14.39. The security deposit plus interest would be $1,014.39.

Resources

Contact

Service Alberta and Red Tape Reduction Contact Centre
Edmonton: 780-427-4088 
Toll free: 1-877-427-4088 (in Alberta)
Email: [email protected] 
 

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