How Much Deposit Should a Contractor Ask For (Without Scaring Off the Customer)?

By Vinay S · Updated October 13, 2026

A woman at a table covered in papers signing a contract with a pen
Photo by Dimitri Karastelev on Unsplash

Most contractors ask for a deposit of 10% to 25% of the job, then bill the rest in stages as work gets done. Joist puts the common range at 10% to 25%, and a deposit above half is rare. Some states cap it. California limits a home improvement down payment to 10% of the price or $1,000, whichever is less. If you are a contractor, the right number is the one that covers your first real costs without leaving the customer holding all the risk.

An argument on r/Contractor shows both sides. A homeowner who had once run his own business asked why contractors want a third of the job at signing. In his old business, he said, suppliers gave him net-30 or net-60 terms. He asked why a contractor with years in business could not do the same, and be paid when the materials show up. He asked if he could refuse a $20,000 deposit and offer payment on delivery and on completion stages instead.

What the contractors said

The replies were blunt. Several said some version of “I am not a bank.” One described his terms as 35% at signing, then 25%, 25% and 15% at defined stages. He said no customer had balked in 13 years.

Another reply came from a cabinet maker. He said lead times run 3 to 6 months, and custom items must be paid in full when ordered. His shop might hold $40,000 to $60,000 in materials for a customer.

One commenter said that when materials arrive at a customer’s house they are often not returnable, so a deposit protects the contractor from a customer who changes their mind. Another noted that the legal protections a contractor has, such as a mechanics lien, are real but slow and costly to use. A third said contractors should aim to be slightly over-billed, so that whatever they have put into the job the customer has already paid for.

Some replies were practical and fair. One said if the customer worries about a big deposit, the contractor can invoice the materials as a separate furnish-only job and install them later. One commenter said the industry standard these days is 50% at signing. Others in the thread described 30% to 35%.

The homeowner raised a fair concern. The contractors’ answer is also fair. A better approach sits between them.

What the guides recommend

Source Suggested deposit
Joist 10% to 25%; thirds (33/33/33) is a common alternative; above half is rare
NADRA contractor author Smaller jobs: 10% at signing plus 15% at start, 25% in all. Large jobs: 5% or a flat amount at signing
NADRA, longer lead times 5% to 10% at signing, 15% to 20% at start
RenoMark (Canada) 10% to 15%; custom items paid when ordered
Virginia Board for Contractors (2025) About 10%; about 30% for custom-made items
California (Attorney General and CSLB) Lesser of 10% or $1,000
Maryland (2021 fiscal note on current law) No more than one-third at signing

A caution on California. Some trade sites state the cap as 10% or $10,000. The Attorney General and the state licensing board both state $1,000. Use the state’s own page.

Maryland’s number comes from a 2021 legislative fiscal note that described the one-third limit as current law. A bill that year would have raised it to one-half, and the note does not show whether that passed. Check the current statute.

Why a smaller deposit is the safer plan

The contractor writing for NADRA has a clear view. He advises against a 50% deposit because it deters customers and puts them at high risk. He also advises against no deposit on larger jobs, because the contractor ends up financing the work, and customers with no money in are more likely to cancel.

His main point is the refund test. If your business closed today, could you give back every customer’s deposit? If you have four jobs with $7,500 deposits each, that is $30,000 you would need on hand. If the answer is no, the business depends on new sales to stay open. He treats deposits as borrowed money and wants progress and final payments to carry most of the cash flow.

He puts the weight on the stages instead. He recommends dividing the remaining price into weekly progress payments, tied to stages like “paint ready” rather than framing or decking, which can leave a lot of money riding on an early stage. He keeps the final payment at 10% or less. He says he delivered $40 million in work and lost only $2,000 to a customer who did not pay the final balance.

Worked example: a $30,000 remodel

Take NADRA’s plan for a small or mid-size job:

  • 10% at signing: $3,000
  • 15% at start: $4,500
  • Total before work is billed weekly: $7,500, which is 25%
  • Final payment held at 10%: $3,000
  • That leaves $30,000 minus $7,500 minus $3,000, or $19,500, for weekly draws

Over a six-week job, $19,500 divided by 6 is $3,250 a week.

Compare the r/Contractor schedule of 35%, 25%, 25% and 15%: $10,500 plus $7,500 plus $7,500 plus $4,500 is $30,000. The first payment is $10,500 at signing.

Now check state limits on the same $30,000 job:

  • California: 10% is $3,000, but the cap is $1,000, so the legal down payment is $1,000.
  • Maryland: one-third is $10,000.
  • Virginia’s recommendation: 10% is $3,000. For custom items, 30% is $9,000.

If $9,000 of the job is special-order material that cannot be returned, a 30% deposit lines up with the Virginia recommendation and pays for the items on order. Use the Deck Cost Calculator, Roofing Cost Calculator or Driveway Cost Calculator to put a number on the job first, then work out the percentages.

Holding versus spending the money

NADRA’s advice is to keep deposits separate from day-to-day operating money, so they could be refunded if needed. New York goes further: Joist says deposits there must be held in escrow until the work is done. In most other places it is a matter of habit.

For the customer, a deposit is a bet on a person you may not know well. The How to Vet a Contractor guide covers license, insurance and references. CSLB also warns that paying the contractor does not guarantee the subcontractors and suppliers are paid, so ask for lien waivers with each payment.

Contract terms that reassure customers

If you are the contractor, these make a deposit easier to accept:

  • A written payment schedule with each draw tied to a finished stage.
  • A named list of any custom or non-returnable items, with their own payment. RenoMark recommends this.
  • A final payment of 10% or less, as NADRA does.
  • A clause that makes the remaining draws due when the job reaches a defined stage, for example “paint ready”, and one that moves draw dates back by the same number of days when weather delays the job. NADRA uses both.
  • Lien waivers with each payment.
  • A plain explanation of what the first payment buys.

If you are the customer, ask for the same things. Do not pay in cash, and do not let payments get ahead of the work.

How to decide

As a contractor, start with the lowest deposit that covers your first real cost: the permit, the first order, the schedule slot. For a small job that may be 10%. For a job with long lead times it may be 5% to 10% at signing and 15% to 20% at start. For custom items, collect what the supplier collects from you.

As a homeowner, accept a deposit in the 10% to 25% range, check it against your state’s limit, and push back on anything above a third without a custom-order reason. A contractor who explains his schedule and puts it in writing is the kind you want.

Sources

Related calculators

Frequently asked questions

What is a normal deposit for a home improvement job?

Joist puts most requests at 10% to 25% of the job. RenoMark, a Canadian renovation group, says 10% to 15%. A contractor writing for the North American Deck and Railing Association suggests 10% at signing plus 15% at start for 25% in all, and advises against 50%.

Is there a legal limit on contractor deposits?

In some states, yes. California limits a home improvement down payment to 10% of the price or $1,000, whichever is less (state Attorney General and CSLB). Maryland's law, as described in a 2021 fiscal note, bars a deposit above one-third of the price at signing. Virginia's board recommends about 10%, or about 30% for custom items. Check your state board.

Why do contractors need money before they start?

Commenters in an r/Contractor thread said materials are often ordered at signing and cannot be returned once delivered, and that a contractor is not a bank. A cabinet maker in the thread said custom items must be paid in full when ordered, with lead times of 3 to 6 months.

How should a contractor hold or spend a deposit?

The NADRA author calls deposits borrowed money and suggests a test: if the business closed today, could you refund every customer's deposit? He says deposits should be kept low and balanced so the answer is yes, and that progress and final payments should fund most of the work. New York requires deposits to be held in escrow, according to Joist.

What contract terms make a deposit feel safe to the customer?

A written payment schedule tied to finished stages, a clear list of any custom items that are paid for at order, a final payment of 10% or less, and lien waivers with each payment. RenoMark says custom or non-returnable items should be named in the contract with their own payments.