How Much Deposit Can a Contractor Legally Collect? The Statutes, State by State

Quick answer: Only eight states cap the deposit a residential contractor may take: California (10% or $1,000, whichever is less), Maryland, Massachusetts, Maine and Tennessee (one-third), Pennsylvania (one-third, but only on contracts over $5,000), Ohio (10%, but only on contracts of $25,000 or more) and Vermont (half of labor or half of materials, whichever is greater, on jobs over $10,000). New York has no percentage cap but requires every pre-completion payment to sit in escrow or be bonded. In the District of Columbia an unlicensed contractor may not take any advance payment at all. Everywhere else, no statute caps the deposit, and the widely circulated figures for Nevada, Arizona, Virginia and Minnesota do not exist in those states' codes.

Why this reference exists

"How much deposit do you take?" is the single most common business question on contractor forums, asked in every trade from painting to roofing. Across dozens of threads on ContractorTalk, PaintTalk, RoofingTalk, Mike Holt's forum and the trade subreddits, the answers are experience ("I take a third"), folklore ("isn't it 10% in California?") and, occasionally, a half-remembered statute. Almost none cite the law.

The web pages that rank for the question are not much better. A wave of 2025 and 2026 "deposit limits by state" tables, published by software vendors and anonymous content sites, cite section numbers that look authoritative. When we opened those sections, some of them say nothing about deposits.

This reference does one thing: it quotes the operative sentence of every state statute that actually limits advance payments on residential work, records where we read it, and dates each row. Where a state has no cap, we say which sections we checked so you can check them too.

Errata: what the ranking pages get wrong

We verified these claims against the statute text on 2026-10-24 and 2026-10-25.

The verified table

Reading the table. "Cap" is the statutory limit on money collected before work begins. "Scope" is which contracts the rule covers. "Special order" says whether the statute allows an extra advance for custom or non-returnable materials. Confidence H means we read the statute or the licensing board's published text; M means we read an official summary.

3a. States with a numeric cap or an equivalent rule

3b. States where we read the relevant statute and found no cap

For the remaining states we located no home-improvement-contract statute that addresses deposits. General contract law and each state's consumer-protection act still apply, and local ordinances can add rules. Treat "no cap" as "no state statute found," and check your city.

Definitions

Deposit or down payment. Money collected before work begins. Every cap in section 3a applies to this amount only.

Progress payment. Money collected after work begins, tied to a stage of completion. California requires each progress payment to "specifically reference the amount of work or services to be performed and materials and equipment to be supplied." New York requires the schedule to show each payment "as a sum in dollars and cents" tied to a stage of completion. Progress payments are how contractors in capped states fund materials and labor without violating the cap.

Special-order materials. Custom or non-returnable items a contractor must buy before the job starts. Massachusetts, Pennsylvania and Ohio let the contractor collect their cost on top of the cap, provided the contract lists them separately. California does not.

Escrow. New York's alternative to a cap. The contractor may hold the deposit, but it stays the owner's property in a segregated bank account until it is applied to the contract under the payment schedule, the owner defaults, or the work is substantially complete.

How each cap works in practice

California

The rule is the strictest in the country and it is printed in capital letters in the statute: the down payment "MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS." On a $4,000 job the cap is $400. On a $40,000 job the cap is $1,000, because the dollar figure governs once 10% exceeds it.

Two carve-outs matter for service trades. The home improvement contract rules in section 7159 apply when the aggregate price exceeds $500. Below that, the section does not apply. Separately, a "service and repair contract" of $750 or less, where the buyer initiated contact and the contractor sells nothing beyond what is needed for the specific problem, follows its own rules, one of which is that "no payment is due, or accepted by the contractor, until the work is completed." A service call that turns into a larger sale loses that status and falls back under section 7159 "regardless of the aggregate contract price."

Violating the cap is cause for license discipline. Contracting without a license is a misdemeanor punishable on first conviction by a fine of up to $5,000, six months in county jail, or both, and an unlicensed contractor cannot sue to collect and can be ordered to return everything paid.

Maryland

Business Regulation §8-617 contains two rules: "A person may not demand or receive any payment for a home improvement before the home improvement contract is signed," and "A person may not receive a deposit of more than one-third of the home improvement contract price before or at the time of execution of the home improvement contract." Maryland licenses all home improvement work with no dollar threshold, so the rule reaches small jobs.

Massachusetts

Chapter 142A, section 2 lists ten required contract items for residential contracting over $1,000. Item six is the deposit clause: "Any deposit required under the contract to be paid in advance of the commencement of work under said contract shall not exceed the greater of one-third of the total contract price or the actual cost of any materials or equipment of a special order or custom made nature." The "greater of" structure means a kitchen job with $20,000 of custom cabinets on a $45,000 contract can take $20,000 up front.

Maine

Home construction contracts over $3,000 must state "the method of payment, with the initial down payment being limited to no more than 1/3 of the total contract price." The same section requires a warranty statement, a dispute-resolution clause and a written change-order clause.

Pennsylvania

The Home Improvement Consumer Protection Act makes it a prohibited act, "for a home improvement contract in which the total price is more than $5,000," to "receive a deposit in excess of: (A) one-third of the home improvement contract price; or (B) one-third of the home improvement contract price plus the cost of special order materials that will be ordered, as designated in the written contract." It is also a prohibited act to "demand or receive any payment for a home improvement before the home improvement contract is signed." The contract itself must list "the amount of any down payment plus any amount advanced for the purchase of special order materials," listed separately.

Note the trigger. A $4,800 bathroom job in Pennsylvania has no statutory deposit cap. A $5,100 job does.

Tennessee

The home improvement contractor statute lists as a prohibited act the "receipt at or before the time of execution of a contract of a deposit of more than one third (1/3) of the contract price," unless bonding or payment arrangements are made. The home improvement license, and this rule, apply to residential jobs of $3,000 to $24,999 in nine counties: Bradley, Davidson, Hamilton, Haywood, Knox, Marion, Robertson, Rutherford and Shelby. Work of $25,000 or more needs a full contractor license statewide.

Ohio

Chapter 4722 applies only to home construction service contracts "exceeding twenty-five thousand dollars." For those, the supplier may take "not more than ten per cent of the contract price before the supplier's performance that is required by the contract begins," except "not more than seventy-five per cent of the total cost of any special order item that is otherwise not returnable or usable." A homeowner may "rescind the transaction or recover the owner's actual economic damages plus an amount not exceeding five thousand dollars in noneconomic damages." Below $25,000 the chapter does not apply.

Vermont

Vermont's residential contractor law, in force since 2022, requires registration before contracting for residential construction "in exchange for consideration of more than $10,000.00" and a written contract before taking any deposit on such jobs. For fixed-price or capped time-and-materials contracts, "the contract may require a down payment of up to one-half of the cost of labor to the consumer, or one-half of the price of materials, whichever is greater." The cap is not half of the contract price. It is half of one component, whichever is larger.

New York

General Business Law §771 requires the contract to tell the owner that "the home improvement contractor is legally required to deposit all payments received prior to completion in accordance with subdivision four of section seventy-one-a of the lien law," or alternatively to "post a bond, contract of indemnity or irrevocable letter of credit." Lien Law §71-a(4) supplies the mechanics: payments received before substantial completion "shall be deposited within five business days thereafter by the recipient in an escrow account in a bank, trust company, savings bank, or state or federal savings and loan association, located in this state." The money stays the owner's until it is properly applied under the payment schedule, the owner defaults, or the contract is substantially performed. There is no percentage limit, and the rule has no dollar floor of its own beyond the $500 threshold for Article 36-A contracts.

District of Columbia

Title 16 of the D.C. Municipal Regulations, section 800.1: "No person shall require or accept any payment for a home improvement contract to be undertaken in the District in advance of the full completion of all work required to be performed under the contract, unless that person is licensed as a home improvement contractor or as a licensed salesperson employed by a licensed contractor." Licensed contractors post a $25,000 bond and face no percentage cap. An unlicensed handyman in the District must finish the job before taking a dollar.

Florida

Florida does not cap deposits. It regulates what happens after a large one. Under §489.126(2), a contractor who "receives, as initial payment, money totaling more than 10 percent of the contract price" must "apply for permits necessary to do work within 30 days after the date payment is made" and "start the work within 90 days after the date all necessary permits for work, if any, are issued," absent just cause or a written extension from the owner. Under §489.126(4), intent to deprive the owner may be inferred "if the contractor fails to refund any portion of the money owed within 30 days after receiving a written demand for such money from the owner." Penalties escalate with the amount involved. A 50% deposit is legal in Florida, but it starts a clock.

What still constrains you where there is no cap

A missing cap is not a free hand. In the no-cap states the deposit is governed by four other rules.

1. The contract must state it. Virginia requires "a specific statement on the amount of the down payment." Pennsylvania (below $5,000) and New Jersey require the total price and payment terms in writing. A deposit that is not in the signed contract is hard to defend.
2. The three-day right to cancel. Under the federal Cooling-Off Rule, any sale of $25 or more made at the buyer's home gives the buyer until midnight of the third business day to cancel, and the seller must refund within ten business days. Connecticut and Pennsylvania extend the three-day right to every home improvement contract regardless of where it was signed. A deposit taken on day one may have to go back on day three.
3. Consumer-fraud statutes. New Jersey's Consumer Fraud Act awards treble damages. Illinois folds home-repair violations into its Consumer Fraud Act. A deposit taken on a non-compliant contract is exposed.
4. Licensing. Georgia, Virginia, Washington, California, South Carolina and North Dakota all bar an unlicensed contractor from suing to collect. The deposit may be the only money that contractor ever sees, and in California the owner can sue to get it back.

A deposit clause that works in every state

The following structure satisfies the strictest rules and is sensible everywhere else.

Deposit. Owner shall pay a deposit of $____ (__% of the Contract Price) upon signing. [California: not to exceed $1,000 or 10% of the Contract Price, whichever is less.] [Special-order materials, where permitted: Owner shall additionally advance $____ for the special-order materials listed in Schedule A, which are non-returnable.]

Progress payments. The balance shall be paid in the following installments, each due upon completion of the stage described: (1) $____ upon ______; (2) $____ upon ______; (3) final payment of $____ upon substantial completion and Owner's walkthrough. No progress payment shall exceed the value of work performed and materials delivered as of its due date.

Right to cancel. Owner may cancel this contract without penalty until midnight of the third business day after signing [fifth business day if Owner is 65 or older, California]. Deposits will be refunded within ten business days of cancellation.

List the deposit and any special-order advance as separate line items. Pennsylvania requires it, and it makes the special-order exception usable in Massachusetts and Ohio.

Method and limits

We started from the question as contractors ask it on forums, listed every state that any ranking page claimed has a deposit rule, and then read the cited section at the statute host. Where a claim did not survive, we recorded it in section 2. Where a state has a home-improvement-contract statute, we read it in full for any advance-payment language and listed it in section 3b if none appeared. We did not read every state's general contract code; a state absent from both tables should be treated as "no statute located," not "no rule."

Rows are dated. Statutes in this area change: Vermont's law is from 2022, California's senior cancellation period from 2021, and Pennsylvania's courts ruled in 2026 that a verbal cancellation within the three-day window is valid. We re-verify quarterly and note changes in the dateModified field.

Last verified 2026-10-25. Not legal advice.