Guide · Booking rules

Security deposit for a holiday rental: worth it, allowed — and how much?

Updated 22 July 2026 · Approx. 6 min read

The red wine stain on the light sofa, the vanished key, the party nobody mentioned beforehand: anyone who rents out knows the risk. A security deposit is the obvious remedy — and at the same time one of the points where guests abandon a booking. This article shows when it really pays off, which amounts are customary, which way of collecting creates the least friction and where the legal limits are.

A security deposit is not a down payment — the difference that decides everything

The two terms are constantly mixed up, in conversations as well as in booking tools. Yet they are two completely different things:

The practical consequence is often overlooked: the security deposit must never appear inside the total. If your booking flow shows “Total: €970” and €300 of that is the deposit, that is simply stated incorrectly — the guest actually pays €670 for the stay and additionally lodges €300 as security. Smoobu separates this cleanly into two fields as well: prepayment for the down payment, deposit for the security deposit. Throwing both into one pot produces wrong invoices and confused guests.

Is a security deposit worth it at all?

The honest answer: it depends on your property — and most hosts decide from the gut rather than from the numbers. What speaks for a deposit:

• It covers real damage without you having to chase the money.
• It filters — and that is often the actual benefit. Someone looking for a party flat books where no deposit is due. This effect kicks in before anyone even books.
• It increases care. Someone who has lodged €300 is more likely to put the wine glass on a coaster.

What speaks against it:

• Friction in the booking process. Every additional condition costs bookings — especially when it comes as a surprise.
• Effort. Collecting, holding, refunding, documenting: with 60 bookings a year that is 120 additional transactions.
• Arguments about the refund — and those end up in a review if things go wrong.

Rather yes for large units for groups, high-end furnishings (sauna, hot tub, designer furniture, expensive technology), party regions and dates such as New Year's Eve. Rather no for small units for couples and families, for a regular-guest clientele and for short stays of one or two nights.

How much? Practical values from the Alpine region

As a rule of thumb the value of one to two nights works well: high enough to have an effect, low enough not to scare anyone off. Use round amounts — €200 feels like a rule, €187.50 feels arbitrary.

The three ways to collect it

Legally: four points that must be right

The most widespread misconception first: “a maximum of three months' rent” — that rule comes from residential tenancy law (in Germany section 551 BGB) and applies to permanent tenancies. It applies to holiday accommodation neither in Germany nor in Austria; there is no fixed statutory upper limit for the deposit there. That does not mean everything is allowed:

1. Proportionality. Your deposit is a standard-terms clause. If the amount bears no reasonable relation to the booking value (a €500 deposit on a €300 booking), the clause can be invalid — and then you have nothing at all in case of damage.
2. Visible before booking. Like the cancellation terms, the deposit is part of the contract and must be shown to the guest before the booking is completed — not only in the confirmation email, and certainly not first at the door.
3. Only genuine damage. You may deduct actual damage, not normal wear and tear. A worn carpet after eight years is wear; a burn hole in it is damage. In a dispute you must prove the damage was not there before — hence: an inventory list and photos.
4. State a deadline and keep it. There is no statutory refund deadline; 14 days after departure is customary. State the deadline bindingly and keep to it. If you withhold something, itemise it in writing — with a photo and an amount.

Tax: why the deposit does not belong on the invoice

As long as the deposit is merely lodged, it is not consideration for a service. It is therefore not subject to VAT and has no place in the total price or in the tax breakdown of your invoice. If you keep it because of damage, it usually becomes genuine compensation — which in principle is also not subject to VAT. It looks different if you use it to settle a service, for example an additionally agreed special cleaning.

That is exactly why clean separation in the booking tool is not a formality: as soon as the deposit slips into the total price, it sits in the VAT base — and the invoice is wrong. Clarify your specific case with your tax adviser.

Checklist: can your booking tool do this?

• Is the deposit handled as a separate item outside the total price — and kept out of the VAT breakdown?
• Is it clearly marked as refundable for the guest, rather than just sitting there as an amount?
• Can the amount be set per property — studio without, chalet with €500?
• Can you choose the payment method (cash on arrival or bank transfer before arrival) and is it shown to the guest?
• Does the deposit appear in the booking step — not only in the confirmation?
• Does it land in the correct field of your system (in Smoobu: deposit, not prepayment)?

Note: this article is for general information and does not replace legal or tax advice.