Guide · Payments
How to set contractor deposits and payment milestones
The short answer
Do not pay the full price upfront. Check state and local deposit limits, then use a written schedule that links each later payment to identified work, services or delivered materials. Define punch-list and closeout work in the final condition, and make final payment only after completion, required inspections and agreed documents.
Editorial status: source-checked on 2026-08-22; not reviewed by a lawyer, licensing authority, engineer or trade professional. United States; deposit caps, payment rules and lien protections vary materially by state and contract type.
Start with local law
The FTC says not to pay the full amount upfront and notes that some states limit deposits. There is no nationwide safe percentage. For contrast, California generally limits a home-improvement down payment to the lesser of 10% or $1,000, subject to exceptions; Massachusetts guidance describes a one-third cap. Those examples do not govern other states.
Pay for verified progress
Use objective milestones such as materials delivered, rough work complete, inspection passed, finish work complete and punch list closed. California consumer guidance says each progress payment should identify the work, services or materials it covers and should not exceed the value already performed or delivered. Pay by a traceable method and keep invoices, receipts and proof of delivery.
- Legal deposit
- Amount for each milestone
- Evidence required before payment
- Treatment of stored materials
- Lien-release process where relevant
- Final inspection and closeout conditions
Sources
Primary government and consumer-protection sources checked for this guide:
- How To Avoid a Home Improvement Scam, Federal Trade Commission. Accessed .
- What Is a Home Improvement Contract?, California Contractors State License Board. Accessed .
- Progress Payment Schedule Worksheet, California Contractors State License Board. Accessed .
- Home Improvement Fact Sheet, New York State Attorney General. Accessed .
- HIC Homeowner Resources, Massachusetts Office of Consumer Affairs and Business Regulation. Accessed .