Pet deposit vs pet fee: Accounting and state rules

Key Takeaways

• A pet deposit is refundable and applied against actual pet-related damage at move-out, subject to the same trust liability accounting as a standard security deposit. A pet fee is a non-refundable one-time charge and is recorded as earned income.

• In California, non-refundable pet fees are outright illegal under Civil Code §1950.5(n), which prohibits labeling any part of a security deposit as non-refundable. Pet rent, a recurring monthly charge, remains the only legally non-refundable pet-related charge in California.

• California's AB 12, effective since July 2024, caps the total security deposit, including any pet deposit, at one month's rent for most residential leases. A separate "pet deposit" stacked on top of a full-month deposit is very likely over the legal cap.

• Texas HB 410 prohibits charging both a refundable pet deposit and a non-refundable pet fee on the same lease. A landlord must choose one structure or the other, and lease templates still listing both are actively non-compliant.

• The accounting treatment differs by type even where both are legal: a pet deposit sits in the trust account as a liability; a pet fee and pet rent are both PM company or owner revenue, recorded when collected.

A lease template still in circulation lists both a $300 refundable pet deposit and a $150 non-refundable pet fee for the same unit. That combination was legal in Texas until HB 410 took effect, and it is not legal now. The accounting treatment, the legal status, and the very question of which term applies have all shifted meaningfully in several major states over the past two years, and a lot of PM companies are still operating on the old rules.

Numetix takes an expert-led, AI-powered, and human-in-the-loop approach to fee classification, applying the correct trust liability or revenue treatment based on the current legal structure for each property's state, not a template inherited from a prior year. This guide covers the distinction, the current state-specific rules that matter most, and how to record each correctly.

Quick Answer: What is the difference between a pet deposit and a pet fee?

• A pet deposit is refundable, held as a trust liability like a standard security deposit, and returned minus any documented pet-related damage at move-out. A pet fee is non-refundable, recorded as income at collection, and never returned regardless of the unit's condition.

• Several states now regulate or restrict this choice directly. California prohibits non-refundable pet fees entirely; only pet rent (a recurring charge) can be non-refundable there. Texas prohibits charging both a pet deposit and a pet fee on the same lease.

• The correct accounting entry depends on which structure applies: a pet deposit is a trust liability, not income; a pet fee and pet rent are both earned revenue recorded when collected, not held in trust.

The three pet-related charges and how each is treated

Three distinct charge types exist and are frequently confused with each other. A pet deposit is a refundable, one-time amount held against potential pet-related damage, returned at move-out minus any documented deductions, functioning exactly like a standard security deposit and subject to the same trust accounting rules. A pet fee is a non-refundable, one-time charge, collected for the privilege of having a pet, and recorded as income at the time it is collected, never returned. Pet rent is a recurring monthly charge added to the base rent, also non-refundable by nature, and recorded as rental income each month it is collected. Whether all three, some, or only one is legally permitted depends entirely on the state.

California: non-refundable pet fees are illegal, and most pet deposits exceed the cap

California Civil Code §1950.5(n) prohibits labeling any part of a security deposit as non-refundable, which makes a true "non-refundable pet fee" illegal in California regardless of what the lease calls it. Pet rent remains legal and uncapped in California, since it is recurring rent rather than a deposit. Separately, California's AB 12, effective since July 2024, caps the total security deposit, including any pet-related deposit, at one month's rent for most residential leases. Because California Civil Code §1950.5(b) treats any refundable amount held against future damage as part of the security deposit regardless of what it is labeled, a landlord collecting a full one-month security deposit plus an additional "pet deposit" on top is very likely operating over the legal cap. The practical fix most California PM companies are moving toward is dropping the separate refundable pet deposit entirely and using pet rent instead.

Texas: pick one, not both

Texas Property Code §92.027, following HB 410, explicitly prohibits charging both a refundable pet deposit and a non-refundable pet fee on the same lease. A landlord must choose one structure: either a refundable pet deposit or a non-refundable pet fee, not both simultaneously. Lease templates that still list both charges, common before HB 410, are non-compliant, and a tenant can sue to recover the non-refundable fee portion if both appear on a signed lease. Texas does not cap the pet deposit amount itself; the restriction is specifically on combining both charge types, not on the dollar amount of either one alone.

How to record each type correctly

A pet deposit is recorded exactly like a standard security deposit: as a trust liability at collection, not as income, with any move-out deduction requiring the same documentation standard applied to a general security deposit deduction. A pet fee is recorded as earned income at the point of collection, since it is non-refundable and there is no future obligation attached to it. Pet rent is recorded as recurring rental income each month, alongside base rent, and should appear as a separately identified line item on the owner statement so the owner can see pet-related revenue distinctly from base rent.

Frequently asked questions

Does an emotional support animal or service animal require a pet deposit or fee?

No. Under federal Fair Housing Act guidance, service animals and emotional support animals are not considered pets for the purpose of pet deposits, pet fees, or pet rent, and charging any of these for an accommodated assistance animal is a Fair Housing violation. This applies regardless of state-level pet fee rules, since it is a federal accommodation requirement that overrides state pet fee frameworks entirely.

Can a pet deposit be higher than the pet-related damage actually found at move-out?

Yes, and the excess amount above documented damage must be returned to the tenant, following the same rules that apply to a general security deposit refund. A pet deposit is not a guaranteed forfeit; it functions purely as a liability against actual, documented damage, with any unused portion refundable within the state's standard security deposit return deadline.

Should a PM company review its existing lease templates for pet fee compliance right now?

Yes, particularly for portfolios in California or Texas. Lease templates written before AB 12 (California, 2024) or HB 410 (Texas) may still reflect structures that are no longer compliant, and continuing to use them exposes both the PM company and the owner to a dispute or refund obligation that a template update would have avoided. A quick audit of current lease templates against each property's state-specific pet fee rules is a low-effort, high-value compliance check.

For property management firms operating across states with different pet fee rules, our bookkeeping services apply the correct trust liability or revenue treatment for each property's specific state, expert-led, AI-powered, and human-in-the-loop.

See the security deposit accounting guide for the full trust liability framework this fits inside.