What a deposit is for
A deposit, also called a down payment, does two jobs. It shows the customer is committed, so you are not holding a crew and a slot for someone who may cancel. And it helps you cover the cost of getting started, especially special-order equipment or materials that cannot be returned.
What a deposit is not: a way to fund the whole job with the customer's money before you have done anything. Regulators treat large up-front payments as a warning sign. The FTC's consumer guidance tells homeowners not to pay the full cost up front and notes that some states limit how much a contractor can ask for as a down payment. Customers read that guidance too.
Check your state first
Deposit rules are set state by state, and sometimes only for home improvement work on a residence. Before you decide on a number, look up your own state's rules on its contractor licensing board or attorney general site. Rules can also change, so check again when you renew your license or update your contract.
Example: California
California is one of the strictest. The Contractors State License Board (CSLB) explains that for home improvement projects a contractor may ask for a down payment, but it must not exceed $1,000 or 10 percent of the contract price, whichever is less. The rule is in Business and Professions Code section 7159.5, and CSLB's Winter 2025 newsletter notes that it applies to all home improvement projects, including ADUs and rebuilding in declared disaster areas. CSLB's contract payment rules sheet adds that any other payments must be clearly listed in the contract and must not exceed the value of work already done or materials already delivered.
| Contract price | 10 percent | Maximum California down payment |
|---|---|---|
| $4,000 | $400 | $400 |
| $9,500 | $950 | $950 |
| $10,000 | $1,000 | $1,000 |
| $45,000 | $4,500 | $1,000 |
This is a plain summary, not legal advice. Read the CSLB pages yourself and ask a construction attorney if your work is unusual, such as swimming pools, service and repair contracts, or commercial jobs.
If your state has no cap
Where the law leaves it to you, size the deposit to the risk you are taking:
- Service and repair: usually no deposit. Collect at completion.
- Special-order equipment: a deposit that covers the non-returnable part, such as a custom-size water heater or a matched system, is reasonable.
- Remodels and roofing: a modest deposit to hold the start date, with the rest billed as work is completed.
- Repeat slow payers: a larger share before work starts, said clearly at booking. Keep a watch list so the office knows who they are.
Whatever you choose, use the same rule for everyone in the same situation, and put it in writing.
Schedule the rest with progress payments
Progress billing is how you stay paid on a long job without asking for money ahead of the work. Each payment is tied to something the customer can see. A worked example for a $48,000 bathroom and kitchen remodel in a state with a California-style cap:
| Payment | Trigger | Amount |
|---|---|---|
| Down payment | Contract signed | $1,000 |
| Progress 1 | Demo complete and materials delivered to site | $12,000 |
| Progress 2 | Rough plumbing and electrical passed inspection | $14,000 |
| Progress 3 | Cabinets and tile set | $14,000 |
| Final | Punch list done, customer walk-through | $7,000 |
Example only. In California, each progress payment must not exceed the value of work done or materials delivered at that point, so set the amounts from your own job cost, not round numbers. Changes go on a signed change order before the work, with the price and how it changes the schedule.
What to put in the contract
- The total price and the deposit amount in dollars.
- Each progress payment, what triggers it, and its dollar amount.
- Any notices your state requires in home improvement contracts. Check whether your state requires specific wording; your contractor board is the place to look.
- How the customer can pay, and when the final payment is due.
- What happens to the deposit if the customer cancels, within your state's cancellation rules.
A signed estimate or contract on the customer's own phone at the kitchen table removes the gap where jobs go cold.
What the office can say
To hold your start date we take a deposit of $1,000 today. After that you only pay as each stage is done, and you will see each one before you pay it. The schedule is right here in the contract.
How SWITCHBOARD handles this
In SWITCHBOARD, the deposit and every staged invoice live on one job number, so the customer, the office and QuickBooks see the same schedule. On a remodel or GC job, the customer can pick an option, sign and pay the deposit on your phone at the end of the job walk. Read how to get paid faster for the rest of the payment process.
Questions people ask
What is the maximum deposit a contractor can take in California?
For home improvement work, CSLB says the down payment may not exceed $1,000 or 10 percent of the contract price, whichever is less (Business and Professions Code 7159.5). Check the CSLB site for the current rule and any exceptions.
Do other states limit contractor deposits?
Some do, often only for residential home improvement. The FTC notes that some states limit down payments. Check your own state's contractor licensing board or attorney general.
Can I ask for materials money before they arrive?
In California, payments other than the down payment must not exceed the value of work done or materials delivered. Other states differ, so check yours.
Should I take a deposit on service calls?
Usually not. Collect at completion. Deposits make sense for special-order equipment, longer jobs and customers who have paid late before, within your state's rules.
Sources
- CSLB California Licensed Contractor Newsletter, Winter 2025 (down payments and progress payments, B&P Code 7159.5) (checked November 10, 2026)
- CSLB: Contract Payment Rules (checked November 10, 2026)
- FTC: How To Avoid a Home Improvement Scam (checked November 10, 2026)