Deposits and down payments

You sign a deck rebuild on Thursday. The lumber order has to go in Friday to land Monday, and the yard wants $3,200 when you pick it up. The homeowner pays when the last board goes down, about three weeks out. For those three weeks the job runs on your money — and there is usually more of your money in it than you think before you add it up.

A deposit is how you stop financing other people's projects. The real question is not whether to ask. It is how much, and whether you can explain the number when the customer asks where it came from.

Deposit, down payment, retainer: three different asks

The words get used interchangeably and they do not mean the same thing.

Which word you pick sets up the next conversation. "Deposit" invites "is it refundable?" — because a deposit sounds like security you are holding. "Down payment" does not, because it is plainly part of a price the customer already agreed to. On most residential jobs you are better off writing first payment or down payment, and saving the word deposit for money against a specific special order you cannot return.

Size the ask to what leaves your account first

A percentage pulled off the contract total is a guess. Work from the hole in your bank balance instead:

Upfront ask = materials you must buy before the next payment
            + mobilization costs (permit, dumpster, rental, sub's first draw)
            + payroll you will cover before the next payment
            - anything your suppliers will carry on 30-day terms

That last line is the lever most people ignore. An open account at the supply house with net-30 terms keeps the material cost out of your bank account for a month, which can cut the upfront ask sharply on a material-heavy job. If you are paying cash or card at the counter, you are the one extending credit, and the deposit has to reflect that.

The math on a $9,400 deck

Here is the same job, priced and then broken down by what you pay before anyone pays you. The line items below are one market's numbers on one hypothetical deck — permit fees in particular run from nothing to four figures depending on the jurisdiction, so run this exercise with your own invoices, not these.

That is 43% of a $9,400 contract, spent before a single board is cut. Ask for 30% and you hand over $2,820, leaving $1,250 of your own money in the job for three weeks. Ask 45% and you are roughly even on day one.

Add labor and the gap can grow beyond a sensible first payment. That is the point where a bigger down payment is the wrong tool and a mid-job payment tied to a milestone is the right one.

Percentages that hold up across job sizes

These are common asks in residential trades, not rules — and in several states the numbers below are above the legal limit. Read the next section before you adopt any of them. Where the law leaves it to you, the ask moves with your supplier terms, your relationship with the customer, and how much of the job is special-order.

The threshold is not job size on its own. It is the first job where you buy something you cannot return. A same-day service call with stocked parts may need no deposit; custom materials may justify a separate first payment where state law allows it.

Your state may cap what you can collect

There is no national rule here. Some states leave the down payment entirely to the contract; others cap it by statute, as a percentage, a flat dollar figure, or both. A few also control how the money must be held. The caps attach to residential home-improvement work specifically, so the same contractor can be capped on a kitchen and unrestricted on a commercial job.

Rules change and turn on the project, license type, and contract amount. Check your own state's contractor licensing board or consumer-protection office. Never treat a percentage online as permission.

Invoicing it so the final bill still reconciles

Bill the down payment as its own invoice with its own invoice number, and reference the estimate in the description — "Down payment, 35% of accepted estimate #2026-114" — so both documents are findable later. The mechanics below work at any percentage; 35% is just the figure in this example, and yours is whatever your state and your signed contract allow.

Give it a short, concrete due date. The leverage on a down payment is not a late fee; it is the schedule. Material gets ordered and the crew gets booked when the payment clears, and saying so once, plainly, in the estimate is enough.

On the final invoice, show the whole contract price and credit the payment as a line item. Do not simply bill the remaining 65% as a standalone figure — customers reconcile against the number they approved, and a bare balance invites a phone call.

Sales tax is left out above for clarity, and it is the one piece you should not improvise. Whether tax on an advance payment is due when you receive the money or when the work is complete depends on your state, and on whether your labor is taxable at all. Ask your state revenue department or your accountant how to handle it on the deposit invoice specifically.

If the job cancels, whose money is it?

First, know whether a customer has a federal or state cancellation right when you take the money. The answer can depend on how and where the sale was made. Write cancellation terms around actual nonrecoverable costs, such as a restocking fee, custom fabrication, or a permit, and have them reviewed locally rather than declaring every payment nonrefundable.

Where the number lives before it becomes an invoice

Whatever percentage you land on, the customer should see it before they agree to the job. A down payment that first appears in an invoice reads like the terms changed. Put the split on the estimate itself in DoneQuote and the figure you worked out from your own material exposure is the figure the customer approves — so raising the first invoice means copying a number you both already signed off on, instead of negotiating it after the lumber is on the truck.