Asking for a deposit protects you from buying materials for a job that gets canceled, and it confirms the customer is committed. Ask for too little and you end up financing the customer's project. Ask for too much and you can lose the job, or in some states break the law.
There is no single right number. The right deposit depends on the size of the job, how much of the cost is materials, whether anything is special-ordered, and, most importantly, what your state allows. This guide walks through common approaches, the legal limits to check, and sample payment schedules you can adapt.
Check your state law first
Before picking a percentage, find out whether your state limits deposits on residential work. Several states regulate how much a contractor can collect before work starts on home-improvement projects, and the penalties for going over can include license discipline or losing the right to collect.
The best-known example is California. Under Business and Professions Code section 7159, the down payment on most home-improvement contracts cannot exceed 10% of the contract price or $1,000, whichever is less. On a $25,000 kitchen remodel in California, that means the deposit can be no more than $1,000, not $2,500. After that, progress payments generally cannot get ahead of the work actually completed.
Deposit rules vary by state and sometimes by type of work, and they change. Check your state contractor licensing board or consumer protection office, or ask a construction attorney, before you set your deposit policy. This guide is general information, not legal advice.
Common deposit ranges by job type
Where your state does not set a lower limit, contractors commonly set deposits based on the job size and material cost. These are typical approaches, not rules:
| Job type | Common approach | Why |
|---|---|---|
| Service calls and small repairs | No deposit; paid at completion | Low material cost, done in one visit |
| Small jobs with materials (for example, $500 to $3,000) | Materials cost, or a modest percentage | Covers parts you buy up front |
| Medium projects | A percentage up front plus a final payment | Spreads risk over the job |
| Large or multi-week projects | Deposit plus progress payments tied to milestones | Keeps payments in line with work done |
| Special-order or custom items | The cost of the special-order item | Often non-returnable if the job is canceled |
The guiding idea is simple: the deposit should cover your out-of-pocket risk, not your profit. If a customer cancels the day after paying, the deposit should keep you whole on materials you already bought, and not much more.
Base the deposit on materials, not a round number
A useful way to set a deposit is to start with what you will spend before you get paid for any labor. For example, a painter quoting a $6,000 exterior job might expect around $1,400 in paint and supplies. A deposit around that amount covers the risk without asking the customer to pre-pay your labor. Where your state allows it, that might be a deposit of roughly 25%.
An HVAC contractor installing a $9,000 system might have $5,000 or more in equipment cost on day one. Taking a deposit that covers the equipment makes sense in states that allow it. In states with a low cap, the contractor would instead schedule a progress payment when the equipment is delivered or set.
If you are not sure of your material and labor split, the job price calculator breaks a job into its parts, and the trade pricing pages, like HVAC pricing and painter pricing, help you sanity-check your numbers.
Sample payment schedules
Here are two illustrative schedules for the same $20,000 bathroom remodel. Adjust them to your state's rules.
Where deposits are not capped low (example):
- Deposit at signing: $4,000 (20%)
- Rough-in complete and inspected: $6,000
- Tile and fixtures installed: $6,000
- Final walkthrough and sign-off: $4,000
In California (10% or $1,000, whichever is less):
- Down payment at signing: $1,000
- Demolition complete: $3,000
- Rough-in complete and inspected: $6,000
- Tile and fixtures installed: $6,000
- Final walkthrough and sign-off: $4,000
In both cases each payment is tied to a milestone the customer can see, so payments stay in step with the work.
Put the deposit terms in writing
The deposit belongs on the estimate or contract before any money changes hands. Spell out:
- The deposit amount and when it is due
- What the deposit covers (for example, ordering materials and scheduling)
- The progress payment milestones and amounts
- What happens to the deposit if the customer cancels, including any non-returnable special-order items
- Any cancellation rights the customer has under state or federal law, such as the three-day cancellation right that applies to some sales made at the customer's home
Use the free estimate generator or the contractor quote template to lay this out. Whether you call it an estimate or a quote matters too; see estimate vs. quote vs. bid.
When a customer pushes back on the deposit
Some customers hesitate to pay anything up front, often because they have heard stories about contractors who took a deposit and disappeared. Treat the question as reasonable and answer it with specifics instead of getting defensive.
- Explain what the deposit pays for. For example: "This covers the fixtures and tile I order this week. Those are special-order and cannot be returned."
- Show your license and insurance. Customers are more comfortable paying a licensed, insured contractor.
- Tie the next payments to visible progress, so the customer never pays far ahead of the work they can see.
- Offer a lower deposit with an earlier progress payment, for example when materials are delivered to the site, if that still covers your risk.
- Make it easy to pay by card or bank payment so the deposit does not delay the start date.
If a customer refuses any deposit on a job where you would be fronting thousands of dollars in materials, that tells you something about how the final payment might go. It is fine to walk away from a job that puts all the risk on you.
Show deposits clearly on the final invoice
When the job is done, the final invoice should show the full contract price, any approved change orders, each deposit or progress payment received with its date, and the remaining balance. That way the customer sees nothing was double-charged. For the full layout, see what to include on a contractor invoice.
ForgeBill tracks deposits on the invoice and calculates the balance due automatically, and the customer can pay a deposit or balance online through an optional Pay Now link.
Frequently asked questions
What is a normal deposit for a contractor?
It depends on the job and your state. Small repairs often need no deposit. For larger jobs, many contractors ask for enough to cover materials, and spread the rest over progress payments. Some states cap deposits on home-improvement work, so check your state's rules first.
Is there a legal limit on contractor deposits?
In some states, yes. California, for example, limits the down payment on most home-improvement contracts to 10% of the contract price or $1,000, whichever is less. Other states have their own rules or none. Check with your state contractor licensing board.
Is a contractor deposit refundable?
That depends on your written contract and state law. Many contracts say the deposit is refundable minus costs already incurred, such as special-order materials. Write your cancellation terms clearly before taking any money, and make sure they follow your state's rules.
Should I take a deposit on a service call?
Usually not. Service calls and small repairs are normally paid in full at completion. A deposit makes more sense when you need to buy materials or special-order items before the job starts.
Free tools for this
- Free estimate generator
Price labor, materials, and tax and download a clean estimate PDF.
- Job price calculator
Work out labor, materials, markup, tax, and deposit for a job.
- Contractor quote template
Scope, exclusions, deposit, and a signature line, ready to print.