Contractor Deposit Limits by State: What You Can Legally Ask
How much deposit can a contractor legally take? In most states the law sets no number at all, and in at least seven it sets one that is lower than a lot of contractors ask for. California and Nevada cap a home improvement deposit at $1,000 or 10 percent, whichever is less. Five more stop at one-third. Ask for 50 percent up front in the wrong state and the problem is not the client pushing back, it is the statute.
Seven states cap the deposit, and the caps are not close
The seven states where we confirmed a general cap on residential deposits split into two groups, and the gap between them is large enough to change how you write a contract. California and Nevada set the tight one. Under California Business and Professions Code 7159.5, a home improvement down payment cannot exceed $1,000 or 10 percent of the contract, whichever is less. On a $40,000 kitchen, that is $1,000, not the $4,000 a quick read of 10 percent suggests. Nevada's NRS 624.970 uses the same formula for residential contractors working on an owner-occupied single-family home.
Maryland, Massachusetts, Maine, Pennsylvania and Tennessee set the ceiling at one-third, each with its own conditions. Maryland's version adds a rule worth copying everywhere: no payment of any kind before the contract is signed. The table below is current as of September 2026 and checked against each statute's text. Read your own state's section before you rely on it, because the conditions are where contractors get caught.
| State | Deposit cap | Where it comes from | Worth knowing |
|---|---|---|---|
| California | $1,000 or 10%, whichever is less | Bus. & Prof. Code 7159.5 | Bonded contractors are exempt |
| Nevada | $1,000 or 10%, whichever is less | NRS 624.970 | Owner-occupied single-family homes; bond exception |
| Maryland | One-third | Bus. Reg. 8-617 | No payment at all before the contract is signed |
| Massachusetts | One-third, or the cost of special-order materials if greater | M.G.L. c. 142A, s. 2 | Custom materials can justify more |
| Maine | One-third | 10 M.R.S. 1487 | Home construction contracts over $3,000 |
| Pennsylvania | One-third, plus special-order materials | 73 P.S. 517.9 | Contracts over $5,000 |
| Tennessee | One-third | Tenn. Code 62-6-510 | Bond exception, or an owner told in writing they can withhold payment |
No cap in your state is not the same as no rules
Most states set no deposit percentage, but several regulate what happens to the money once you have it, and those rules can be harder to live with than a cap. New York is the clearest case. Its home improvement law sets no limit on the deposit, but General Business Law 771 requires payments received before the job is finished to go into a trust account under the Lien Law, unless you post a bond or letter of credit instead. It also says progress payments must bear a reasonable relationship to the work done and materials bought. A New York contractor can take 50 percent. They cannot spend it on the last job's payroll. Roofers are the exception: General Business Law 771-b bars a roofing contractor from requiring any deposit at all, though materials can be invoiced on delivery if their cost was disclosed in writing beforehand, and the rest on completion.
Florida works from the other end. Take more than 10 percent of a residential contract as an initial payment and Florida Statute 489.126 gives you 30 days to apply for permits and 90 days after the permits issue to start work, unless the owner agrees in writing to longer or you have just cause.
New Jersey comes up in almost every list of cap states. We could not find a percentage in the regulation's own text, so it is not in our table.
What happens when the deposit is over the line
The consequences run from an unenforceable contract term to a criminal charge, and California sits at the serious end. The same section that sets the cap makes a violation a misdemeanor, punishable by a fine of $100 to $5,000, up to a year in county jail, or both. That is the statute talking, before the licensing board has said anything about your license. Nevada takes a civil route: a deposit term above the cap makes that part of the contract voidable by the homeowner. The practical risk is the same everywhere. A deposit dispute usually starts on a job that has already gone sideways, when the client is looking for leverage and finds it in a number you wrote at the kitchen table months earlier.
That is why the deposit belongs in your written terms, next to the payment schedule, and not in a text message. We covered what else belongs there in estimate terms and conditions that protect you.
The bond exceptions are real, but they are not a loophole for most small crews. California exempts contractors who furnish a performance and payment bond or approved joint control covering the full job, and Tennessee has a bond route too. If you carry that kind of bond, you already know it. If you are not sure, you do not have one.
A big deposit is the wrong fix even where it is legal
Here is where we will lose some readers: in a state with no cap, a 50 percent deposit is still usually the wrong answer to the problem it is meant to solve. Contractors ask for large deposits to cover materials and to make sure the client is serious. Both are fair. But a deposit sized to protect you against a bad client also scares off good ones, who have read the same articles about contractors vanishing with half the money. And it does nothing for the part of the job where cash actually runs short, which is the middle, after the deposit is spent and before the balance is due.
The capped states point to a better structure anyway. Massachusetts and Pennsylvania both let special-order materials justify more than a third, which is the honest reason for money up front. Price the custom cabinets or the special-order windows as their own payment, then tie the rest to milestones the client can see: rough-in passed, drywall hung, cabinets set.
A payment schedule in Jobkore does this on the estimate itself. You set the deposit and the draws, up to six payments in all, and the balance is whatever is left. The client agrees to all of it when they accept. If draws are new to you, we covered tracking partial payments without a spreadsheet separately.
Read your deposit statute this week
Find your state's home improvement contract law this week and read the section on payments. It is usually one paragraph, and it will take less time than this article. Then open the contract or estimate template you actually send and check three things: the deposit amount, whether special-order materials are listed separately, and whether the payment schedule matches work a client can see. If your state is in the table above, fix the deposit line before your next bid goes out.
None of this is legal advice, and a local construction attorney can answer the edge cases in an hour. But the deposit line is the one number on your contract a homeowner's lawyer will check first.
Frequently Asked Questions
How much deposit can a contractor legally ask for?
It depends on the state. California and Nevada cap a home improvement deposit at $1,000 or 10 percent, whichever is less. Maryland, Massachusetts, Maine, Pennsylvania and Tennessee cap it at one-third, with conditions. Most other states set no percentage, though some regulate how the money is held.
Is it normal for a contractor to ask for 50 percent up front?
It happens, but it is illegal on home improvement contracts in states with a cap, and many homeowners read it as a warning sign. Where it is legal, a smaller deposit plus payments tied to visible milestones usually covers materials and cash flow without scaring off good clients.
What happens if a contractor takes too large a deposit in California?
Taking more than $1,000 or 10 percent, whichever is less, on a home improvement contract is a misdemeanor under Business and Professions Code 7159.5, punishable by a fine of $100 to $5,000, up to a year in county jail, or both. Contractors with a qualifying bond are exempt.
Does New York limit contractor deposits?
New York sets no percentage cap on home improvement deposits. Instead, General Business Law 771 requires payments received before completion to be held in a trust account under the Lien Law, unless the contractor posts a bond or letter of credit, and progress payments must reasonably match the work done.
