Most contractors who break their state's deposit law aren't cutting corners. They just read "10% or $1,000" and assumed it meant they could take the bigger one.
Last reviewed: August 2026 · 7 min read
The short version. A handful of states cap what you can collect before work starts. In California and Nevada the cap is $1,000 or 10% of the contract price — whichever is LESS. In Maryland and Pennsylvania it's a third of the contract price. Most states have no explicit cap at all.
This is not a soft rule. In California, exceeding it is punishable as a misdemeanor and is a licensing matter — which makes it one of the few pieces of paperwork on a job that can cost you the license rather than the profit.
Take a $60,000 kitchen remodel in California. What can you collect at signing?
The statute says whichever is less. And because $1,000 is a fixed number while 10% scales, the practical effect is that on any California home improvement contract over $10,000, your maximum deposit is $1,000 — full stop. A $60,000 kitchen, a $200,000 addition, a $2,000 door replacement: the first two are capped at $1,000 and only the third gets the 10% calculation ($200).
That's a genuinely hard constraint on a small remodeler's cash flow, and it's why the second half of this guide is about structuring around it rather than complaining about it.
These are the states where we could confirm an explicit statutory cap on residential home improvement deposits at the time of writing. Verify before you rely on any of it — see the note at the bottom.
| State | Cap on money collected up front | Worth knowing |
|---|---|---|
| California | $1,000 or 10% of the contract price, whichever is less | Bus. & Prof. Code §7159.5. The contract must carry a "Down Payment" heading and state the cap in at least 12-point boldface. Violation is punishable as a misdemeanor. A bond/joint-control exemption exists — see below. |
| Nevada | $1,000 or 10% of the contract price, whichever is less | Residential improvement work. Same "lesser of" structure as California. |
| Maryland | One third of the contract price | Bus. Reg. §8-617. Separately prohibits accepting any payment before a written contract is signed. |
| Pennsylvania | One third of the contract price, plus the actual cost of special-order materials | HICPA, 73 P.S. §517.7. Applies to contracts over $5,000. The special-order materials must be identified in the contract. |
| Massachusetts | The greater of one third of the contract price or the actual cost of special-order materials | Residential contracting over $1,000. Note this one says greater, not lesser. |
| Arizona | No statutory cap | The contract governs — but the Registrar of Contractors can still investigate an excessive deposit as a complaint, so "no cap" isn't "no risk". |
| Most other states | No explicit statutory cap | Indiana, Maine and Tennessee are also reported to impose limits. Anywhere without a cap, general contract law, consumer-protection statutes, and your licensing board's fitness rules still apply. |
Four things beyond the number itself:
The home improvement contract needs a section headed "Down Payment" showing the actual amount, and it must display this statement in at least 12-point boldface type:
THE DOWN PAYMENT MAY NOT EXCEED $1,000 OR 10 PERCENT OF THE CONTRACT PRICE, WHICHEVER IS LESS.
So a compliant California contract tells the homeowner the limit you're bound by. If yours doesn't have that block, the contract itself has a problem independent of what you collected.
The obvious workaround — take $1,000 at signing, then bill $20,000 on day one — doesn't work. Progress payments in California may not exceed the value of the work actually performed (including materials delivered) at the time of the payment. The CSLB has issued industry bulletins specifically on progress payment restrictions, which tells you how often it comes up.
This is the part that trips up otherwise careful contractors: they respect the deposit cap and then break the progress payment rule instead. Both restrictions apply, to the same contract, at the same time.
A contractor who furnishes a blanket performance and payment bond, a lien and completion bond, an approved equivalent, or a joint control approved by the CSLB registrar covering full performance and payment may be exempt from the down payment and progress payment limits. The logic is straightforward: the bond protects the homeowner, so the restriction that existed to protect them can relax.
If you routinely run jobs where a $1,000 deposit genuinely doesn't work — large remodels, heavy special-order content — this is the legitimate path, and it's worth pricing out with your surety and running past a construction attorney. The requirements and approval mechanics are specific, so don't assume any bond you already carry qualifies. Your license bond does not.
Violating the down payment and progress payment provisions is punishable as a misdemeanor, and separately exposes your license to CSLB discipline. Weigh that against the cash-flow convenience of an extra $4,000 at signing.
Five things that actually work, in rough order of how much they help:
Once you've decided the milestones, the sequencing is its own problem: how to build a draw schedule that keeps you cash-positive works through a full eight-draw example on a $60,000 kitchen, starting from exactly the $1,000 California deposit.
On the Contract tab, Payment Terms is where the deposit and draw schedule live, and the app flags this specific rule inline — the help text next to it warns that down-payment limits vary by state and names the California 10%-or-$1,000-whichever-is-less cap, because it's the one most likely to catch a US remodeler out. You write the schedule; the app makes sure the question gets asked.
The Terms and Conditions section can generate a state-specific starting draft using the state in Settings → Company Address. Treat that as a first draft for your attorney, not a compliant contract — BuildCraft Pro deliberately does not supply the legal language, and a generated draft won't include your state's mandatory notices and type-size requirements. The 12-point boldface down payment block above is a good example of something you have to get right in your own template.
On Invoicing, quick-create buttons like 10% Deposit and 25% Draw exist for speed on jobs where those percentages are lawful and appropriate. In a "whichever is less" state on a job over $10,000, the deposit invoice is a flat $1,000 — type the amount rather than reaching for the percentage button.
$1,000 or 10% of the contract price, whichever is less. In practice that means $1,000 on any home improvement contract above $10,000. It's set by Bus. & Prof. Code §7159.5, has to be disclosed in the contract in 12-point boldface, and violating it is punishable as a misdemeanor.
California's §7159.5 sits in the Home Improvement Business article and is aimed at home improvement contracts with homeowners or tenants on residential property. Commercial and new-construction work is generally governed differently. Because the boundaries (mixed-use, an owner-occupied duplex, a rental) are exactly where this gets argued, confirm your specific job type with an attorney rather than assuming a project falls outside.
Consent generally doesn't cure a statutory cap. These are consumer-protection provisions, and a signature agreeing to an unlawful term doesn't make the term lawful. The compliant route in California is the bond or joint-control exemption, not the homeowner's permission.
Confirmed here: California and Nevada ($1,000 or 10%, whichever is less), Maryland (one third), Pennsylvania (one third plus special-order materials, contracts over $5,000), and Massachusetts (greater of one third or special-order materials, contracts over $1,000). Arizona has no cap but can investigate excessive deposits. Indiana, Maine and Tennessee are also reported to have limits. Most states have no explicit cap.
Talk to a construction attorney in your state now rather than at the end of the job. Refunding the excess promptly and documenting it is generally a better position than hoping it goes unnoticed, but the right move depends on your state, how far along you are, and whether the contract itself is compliant. This is not a question to resolve from a web page.
Set your deposit and draw schedule on the Contract tab, then bill against it from Invoicing with live Invoiced / Collected / Outstanding totals. 14-day free trial — $0 today.
🎁 Start 14-day free trial →