How to Set General Contractor Rates in the USA

The practical way to set general contractor rates in the USA is as a markup on the cost of each job, not as an hourly figure. For a firm with remodeler-average overhead and profit, that markup belongs in the low 40s, not the teens. NAHB’s 2026 Remodelers’ Cost of Doing Business Study (FY2024 data) found the average remodeler kept a 29.9% gross margin. Operating expenses took 23.6% of revenue, leaving a 6.3% net profit margin. A 29.9% gross margin takes a markup of about 42.7% on direct job cost. At that level of overhead, a 15% or 20% markup loses money.

Homeowners see a different number. HomeGuide, a consumer cost guide last fact-checked in September 2023, quotes a GC fee of 10% to 20% of construction cost. That fee is what a customer sees. Your markup is what your business needs to pay for the office, the trucks, your time and a profit. Keep the two apart, because the second decides whether a busy year pays you.

Markup, gross margin and net margin are three different numbers

Markup is a share of your cost, and margin is a share of the customer’s price. Price a $60,000 job at $75,000 and you have a 25% markup but only a 20% gross margin. The same $15,000 is divided by the larger figure.

Gross profit is the price minus the direct cost of the job: your crew’s labor, materials and subcontractors. Gross margin is that profit as a share of the price. Net margin is what is left after overhead. That covers the office, insurance, vehicles, marketing and your own pay as the owner. To turn a target gross margin into a markup, divide the margin by one minus the margin. A 30% target is 0.30 ÷ 0.70, a markup of 42.86%.

Every figure in the table below is gross margin, before overhead.

NAHB’s builder study runs leaner on overhead. Builders reported a 20.7% gross margin, 12.0% operating expenses and an 8.7% net margin in FY2023. That works out to a markup of about 26.1%. Part of the gap is definitional: builders count indirect construction costs in cost of sales, while remodelers carry them in operating expenses. If your work is kitchens, baths and additions, the remodeler numbers are the closer benchmark.

What a 15%, 20% or 25% markup leaves on a $60,000 kitchen

Take a hypothetical fixed-price kitchen remodel. The direct cost is $60,000: $22,000 of your own crew’s labor, $20,000 of materials and $18,000 of subcontractors. Overhead runs at 20% of revenue, between NAHB’s builder and remodeler averages. You want an 8% net profit. All three inputs are invented for the example, and the arithmetic is exact.

Overhead and profit are both shares of the price. So the price is the cost divided by what is left after them: $60,000 ÷ (1 − 0.20 − 0.08) = $83,333. That is a 38.9% markup and a 28% gross margin. At lower markups, with the same 20% overhead, the job looks like this:

• 15% markup: price $69,000, gross profit $9,000, overhead share $13,800, net loss of $4,800 (−7.0%).
• 20% markup: price $72,000, gross profit $12,000, overhead share $14,400, net loss of $2,400 (−3.3%).
• 25% markup: price $75,000, gross profit $15,000, overhead share $15,000, break-even.
• 38.9% markup: price $83,333, gross profit $23,333, overhead share $16,667, net profit of $6,667 (8%).

None of the losing versions looks like a loss on the day the homeowner signs. The job still pays for its materials, its subs and its crew. The shortfall turns up later, when rent, insurance and truck payments come out of gross profit that was never there. Overhead is charged here as a share of each job’s price, but the dollars behind it are mostly fixed, so a slow quarter pushes the real percentage up.

Work out your own overhead percentage first

Start from last year’s books. Add up everything that is not a direct job cost: office or shop, insurance, vehicles, phones and software, marketing, estimating time and a salary for yourself. Divide the total by the revenue you can realistically bill this year. If your accountant prepares a year-end profit and loss statement, most of those lines are already on it. If job costs and overhead are tangled together, bookkeeping basics for US contractors shows how to separate them.

Count your own time once

Your management time is part of what the price must cover. The Bureau of Labor Statistics’ Occupational Outlook Handbook (updated August 27, 2026) notes that construction managers are often called general contractors. It puts their median wage at $114,990 a year, or $55.28 an hour, for May 2025. In residential building construction the median was $98,390. The survey covers employees only, and BLS counts 38% of construction managers as self-employed. Read it as the salary you would pay someone else to do your job.

Say the kitchen takes 100 hours of your scheduling, site visits, supplier calls and homeowner meetings. At $55.28 an hour, that is $5,528. It can go into overhead as part of your salary, or onto the job as a supervision line. It cannot go in both. Counting it twice overprices the job, and leaving it out of both means you run the project for free.

Put the full cost of labor and subs into direct cost

Direct labor is more than the hourly wage. BLS’s Employer Costs for Employee Compensation release for June 2026 (published September 9, 2026) put construction-industry compensation at $51.96 an hour. Wages were $36.13 of that and benefits $15.84, so benefits added about 44% on top of pay. Apply that ratio to the May 2025 median carpenter wage of $29.12, and the employer’s cost is about $42 an hour. It is an industry-wide average, so swap in your own payroll and insurance figures once you have them.

Subcontractor bids are direct cost too, and they carry your markup. Check them against the billing ranges in our guides to electrician rates by state and plumber rates in the USA before a high bid ends up inside your price. Homes built before 1978 add another line. EPA’s lead-safe rule lists general contractors among the covered firms when work disturbs more than 6 sq ft of paint per room inside or 20 sq ft outside. Firm certification and a certified renovator on the job both have to be paid for, as EPA RRP certification for contractors explains.

Fixed price, cost-plus or a guaranteed maximum price: who carries the risk

The markup decides whether a job can make money. The contract decides who pays when costs move, and in 2026 they are moving. In BLS’s August 2026 Producer Price Index, as analyzed by NAHB, inputs to new residential construction were up 7.8% on a year earlier. Softwood lumber rose 13.0%, plywood 12.5% and nonferrous wire and cable 19.6%. In NAHB’s July 2026 builder survey, the median builder reported material costs up 6.7%, and builders with five or fewer starts reported 9.1%.

A fixed price needs a contingency line

On a fixed price, also called a stipulated sum, you carry that risk. AIA’s guide to owner contracts says this basis suits a complete scope, detailed drawings and limited expected changes. Add a contingency line to cost before the markup. In the kitchen example, a 5% contingency adds $3,000 to cost and lifts the price from $83,333 to $87,500. The 5% is illustrative, not an industry standard. If supplier increases are already reaching your quotes, how tariffs are driving up contractor material costs covers ways to protect a fixed price.

A cost-plus fee is still a markup

On cost-plus, the owner reimburses the cost of the work plus an agreed fee. AIA notes that it needs clear cost reporting and audit rights, so your job file has to be ready for the homeowner to read. The fee still has to clear your overhead. Cost plus a 20% fee on the kitchen is $72,000, the same $2,400 loss as the 20% markup above. That changes only if the contract lets you bill some overhead, such as site supervision, as part of the cost of the work.

A guaranteed maximum price (GMP) sits between the two. The job runs on a cost-plus basis below a cap, and the owner pays no more than the cap. For a kitchen or bath, start with A113, AIA’s agreement for remodeling a single-family home. A101, A102 and A103 cover stipulated sum, cost plus with a GMP and cost plus without one. Home improvement contract rules vary by state, so check whichever contract you use against yours.

Change orders carry the same markup

Whichever basis you choose, a change is a new piece of pricing. AIA’s G701 Change Order records a change agreed by the owner, contractor and architect; on a remodel with no architect, use the change-order clause in your own contract. Price each change with the markup your overhead needs, and get the homeowner’s signature before the crew starts on it. On a fixed-price job, a string of unpriced “while you’re here” extras comes straight out of that 8% net profit.

When a homeowner asks what you charge

A homeowner who has read a consumer cost guide may expect a fee of 10% to 20%. You don’t need to argue with that figure. Explain what your price includes: materials, subs, your crew, the scheduling and supervision, and the overhead that keeps you in business for the warranty call. A price built from your own overhead figure is one you can explain line by line. On the hypothetical kitchen, a 38.9% markup earns $6,667. A 20% markup means paying $2,400 to build the same room.

Updated October 2026: rebuilt around NAHB’s cost-of-doing-business margins and May 2025 BLS data. The markup table is now labeled gross margin; an earlier version labeled it net margin, which only holds for a business with no overhead.