How Much Deposit to Ask For

A contractor deposit covers the money you have to spend before you earn a dollar: materials, permits, a dumpster, holding a slot on your calendar. It is not your profit and it is not a prepayment for labor. Framing it that way makes it much easier to explain.

• Small jobs (under $1,000) — often no deposit at all. Bill on completion and keep it simple.
• Mid-size jobs — 10% to 30%, or enough to cover the material order, whichever is larger.
• Material-heavy jobs — price the deposit off the actual material cost, not a percentage. If cabinets are $9,000, the deposit covers the cabinets.
• Custom or special-order work — collect the full cost of anything that can't be returned or resold.

Several states cap what a residential contractor can collect up front — some as low as 10% or a fixed dollar amount. Check your state's contractor licensing board before you set a standard number.

Don't apologize for asking for a contractor deposit and don't bury the deposit amount. Say what the money buys, and tie it to a date on the calendar. Customers rarely argue with a deposit that has a clear purpose.

Thanks again for going with us on the kitchen. To lock in the start date and get the cabinet order placed, we collect a $2,400 deposit — that covers the materials up front. Once it's in, I'll put you on the schedule for the 14th and send the confirmation.

• Put the deposit amount and what it covers in writing.
• Never start work before the deposit clears.
• Give a receipt every single time.
• Say plainly whether the deposit is refundable, and by when.
• Keep deposit money for that job's materials — don't use it to finish the last job.

Some customers will push back on a contractor deposit. Offer a smaller deposit tied strictly to the material invoice, or offer to have the supplier bill them directly. If they refuse any up-front money on a material-heavy job, that isn't a negotiation — it's a warning sign.

A contractor deposit only protects you if the deposit terms are written down before the customer pays. Your estimate or contract should state:

• The deposit amount and what it covers (materials, scheduling, special orders).
• When it is due — usually at signing or before you order materials.
• Whether any part of it is refundable if the customer cancels, and when.
• How it will appear on the final invoice (subtracted from the total).

Copy-ready wording: "A deposit of $1,200 (40%) is due at signing to schedule the work and order materials. The deposit will be credited toward the final invoice. Custom or special-order materials are non-refundable once ordered."

On a $3,000 bathroom repair with $1,100 in materials, a 40% deposit of $1,200 covers your materials plus a little of your time. If the customer cancels after you order the special tile, you aren't left holding the cost. At the end, the invoice shows: Total $3,000, less deposit $1,200, balance due $1,800.

• Very small jobs: many contractors skip the deposit under a set dollar amount and ask for payment on completion instead.
• Long projects: use a deposit plus progress payments rather than one huge upfront amount.
• Repeat customers: you may relax the deposit for people with a payment history, but keep it for special orders.
• Insurance jobs: confirm who is paying and when before you start — the homeowner, the insurer, or both.

Are there legal limits on deposits? Some states cap how much a home improvement contractor can collect up front, and some require specific contract language. Check your state's contractor licensing board before setting your policy.

Should I take a deposit by card? Cards are fast and convenient, but processing fees cut into the amount. Many contractors accept cards and build the fee into their pricing; whatever you choose, list the methods you accept.

What if the customer cancels after paying? When a customer cancels after paying a contractor deposit, follow your written deposit and cancellation terms. Refund what you haven't spent if your terms promise it, and give a short written breakdown of any materials or time you're keeping.

Keep a simple list of every contractor deposit you've received: customer, amount, date, and job. It stops deposits from being spent on the wrong job and makes it easy to show the credit on each final invoice. Some states have rules about how contractor deposits must be held, so check yours.

• Amount and percentage written on the estimate.
• Due date stated before materials are ordered.
• Refund policy spelled out, including special orders.
• Deposit shown as a credit on the final invoice.