Can a landlord use the tenants security deposit to have carpets cleaned due to pet odor from tenants dog upon vacating?

How long have you lived there and were you paying extra for the animal? Did the landlord know you owned a dog?

Yes we moved in 2006 and the landlords knew we had a dog, they put new carpet in 2008 and have deducted $175.00 from our $1800 security deposit upon vacating this month. They say the carpet had pet odor. Should I take them to small claims court for the deduction?

For that amount of money and if they returned the rest I wouldn't take it any further at this time. Is it really worth it? It is likely there was a pet odor and since you live with the dog you hadn't noticed it. It doesn't seem out of line since there was new carpeting installed in the last few years.

Walk away and be thankful $175 is all the LL kept back. Dog "odor" is not normal wear and tear and is legal to hold back carpet cleaning costs.

I can't believe you are even questioning this. Did you do a walkthru with the landlord when you turned over the keys?