How do you Return/Refund Security Deposit after Second Year?

[Joseph Milano]

One of my tenants is coming up on their first lease renewal, so if they decide to stay, it will be the start of their second year. I currently hold 2 months of security deposit for them. 

I understand that after the second year you can only hold 1 month of the current rent as security, but I am curious how other landlords or property managers in Pennsylvania handle returning the other half? Do you return the money as a check as soon as they sign the lease, refund the last months rent for the following term, something else?

I appreciate any guidance anyone can provide. 

[Nathan Gesner]

Quote from @Joseph Milano:

I would talk to the renter to see what they want to do.

The easiest method is to get tenant's permission to apply the funds toward their next month of rent.

If they prefer the money back, I would issue them a check, money order, or cashier check when they sign the new lease.