Security Deposit

No, you can't. Deposits can only be used for damages, not rent due.

maybe you can set off the deposit against the rent due under the lease... check with an atty. if it is the same amount...

The security deposit can be used for damages and rent due upon vacancy. But the whole security deposit is an unfortunate byproduct of the lack of responsibility built into the equation for renting, where renters need to be held to a standard they wouldn't otherwise behave to on their own because they have no ownership stake in the housing situation.

so, can you legally keep it because he broke the lease a month early?

Just agree with the tenant to call it a wash, and go on to the next one.

he wants it back or he's threatening to bring me to court. does anybody know if it's legal to keep it? He did brake his contractual obligation.

What are your damages? If the tenant left a month prior to the lease expiration, that is his problem, not yours. You did not have a month to month lease. Courts and states do differ on your requirement to mitigate damages, but that would come into play for a longer period than a month because it would be deemed impractical to be able to have rented within one month.

So you have damages equal to one month of rent and you used the one month security deposit to cover that. The tenant has no damages.

If the tenant sues you, 2 scenarios
1 - you are right. Well you are, so let it play out. Make sure when the court clerk does the roll call that you ask that your case be heard By the Court (i.e. by a judge, not by an arbitrator) although this may mean that you have a postponement.
2 - you are wrong. You aren't but if somehow you were, make sure to fuck with the other guy. Postponements, motions, etc. all are fairly easy and area a really fun way to inconvenience the other guy. Remember, once someone sues you, you've already agreed not to work it out in a friendly basis, so take the gloves off.
Good luck.

Also, truth be told, even though it is relatively easy to sue in Small Claims, most people don't. A Small Claim's Court can only award damages. There are no sanctions or punative payments in Small Claims. So the worst is that you could lose the amount of actual provable damage you've created. So when someone threatens to sue, or even if you get one of those letters on a lawyer's letterhead (oooh! scary!), ignore it.

thank you DB!! very helpful.

"What are your damages? "

That is the correct answer. And damages can include lost rent. So if you lost one month's rent, you are damaged by that amount and can deduct it from the security. What you can't do is re-rent it and BOTH collect rent from one party and 'damages' from the other 9in terms of lost rent)