How Much of a Deposit Can You Take on a Home Improvement Job in the US?

You ask for a third up front on an $18,000 remodel, and in California that home improvement deposit breaks the law. Each state sets its own limit, from $1,000 in California to $13,500 in Pennsylvania on the same job.

Say the job is a kitchen in an owner-occupied house, with $7,500 of custom cabinets ordered before work starts. When the homeowner asks how much you need up front, the home improvement deposit you can lawfully take depends on where the house is. These figures are for illustration, with no bond or joint control unless stated.

• California: $1,000. Ten percent would be $1,800, and the lower figure wins. The cabinets get paid for when they’re delivered.
• Maryland: $6,000, a third of the price, and only once the contract is signed.
• Massachusetts: $7,500, the cost of the cabinets, because it is higher than a third ($6,000). Not $13,500.
• Pennsylvania: $13,500, a third plus the cabinets, if the contract names them as special-order materials.
• Florida: any amount you agree. Take more than $1,800, though, and you must apply for permits within 30 days.
• New York: any amount you agree, held in a New York escrow account or covered by a bond until you earn it.

The contract you print for one state can be unlawful in the next.

The federal rule covers refunds, not limits

The FTC’s Cooling-Off Rule, 16 CFR Part 429, says nothing about how much you can collect. It touches your deposit in one way. If a homeowner cancels a sale made at their home within three business days, you have to refund every payment within 10 business days. Our article on the three-day cooling-off rule covers who can cancel and how. Any cap on your home improvement deposit comes from your state’s law.

Home improvement deposit rules in six states

Each of these is a state statute that applies whether or not your contract mentions it. The figures below are for contracts above each state’s minimum size, usually $500 or $1,000.

Massachusetts and Pennsylvania look alike but work differently. Massachusetts lets you take the greater of two figures: a third of the price, or what the custom materials cost. Pennsylvania lets you add them together. Mix the two up and you can overcharge a Massachusetts homeowner by thousands. The Massachusetts rule covers owner-occupied homes of one to four units.

California: $1,000, and pay as the work gets done

California’s home improvement deposit cap applies to every contract over $500, including pools, HVAC replacements, windows and solar. Your contract must show the down payment under its own heading, with this sentence in at least 12-point bold: “THE DOWNPAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.” After the down payment, you may not ask for or accept more than the value of the work done or materials delivered. That rule also covers advances from a lender financing the job.

Any further payments need a schedule in dollars and cents, each tied to a described phase of work. On the $18,000 kitchen, one workable schedule is $1,000 down, $4,500 when demolition and rough-in pass inspection, $5,500 when the cabinets and fixtures arrive, $4,000 when tile and countertops are in, and $3,000 at the final walkthrough.

The Contractors State License Board’s bulletin on progress payments sets the rule out in plain terms. Taking too much up front is a misdemeanor, with a fine of $100 to $5,000, up to a year in jail, or both, and it is grounds for CSLB discipline.

There is one way around the cap. A contractor who furnishes an approved performance and payment bond, a lien and completion bond, or a joint control arrangement can take payment before completion. To apply for a blanket bond, your license needs at least two years in active status.

Florida and New York: no cap, but strings attached

In Florida, any home improvement deposit over 10% of the price starts two clocks. You must apply for the permits within 30 days of being paid. Then you must start the work within 90 days after the permits issue. Just cause, or the homeowner’s written agreement to longer periods, lets you go beyond either deadline. Fail them and refuse a refund demand, and the penalties climb steeply. On an initial payment between $1,000 and $20,000, a violation is a third-degree felony. It applies whether or not you are licensed.

New York lets you take what the homeowner agrees to, but the money stays theirs until you’ve earned it. Payments received before the job is substantially complete go into an escrow account at a New York bank within five business days. Your contract must tell the homeowner that. Instead of escrow, you can give them a bond or an irrevocable letter of credit within 10 business days. Your contract’s payment schedule then has to bear a “reasonable relationship” to the work, materials and expenses at each stage.

Special-order materials and the home improvement deposit

Custom cabinets, made-to-measure windows and a special-order tub are what usually push a contractor to ask for a bigger home improvement deposit. In Massachusetts and Pennsylvania, special-order materials ordered before work starts are built into the deposit rule, so list them in the contract with their cost. In California they aren’t, so you can’t bill for the cabinets when you order them. You can bill when they arrive on site, because that is “material delivered.”

When the homeowner asks why the deposit is so small, the law gives you a straight answer. Tell them what your state allows, show them the payment schedule, and point to the line where the materials are paid for. Stage payments also keep the conversation simple when the scope grows: a signed change order adds its own line to the schedule. If the final payment never arrives, a mechanic’s lien is the backstop. And if you work across a state line, check that state’s licensing rules before you quote.