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The short version
- Ask for the deposit in the estimate, before the client says yes, not after.
- Size it to your risk: enough to cover materials and the time you are holding for the client.
- On big jobs, use a deposit plus stage payments instead of one large final invoice.
- Some places cap deposits. In California, a home improvement down payment cannot be more than $1,000 or 10% of the price, whichever is less.
Why take a deposit
- It confirms the job. A client who has paid something is far less likely to cancel or go quiet.
- It pays for materials. You should not be lending a client the cost of their own cabinets.
- It holds your time. If you turn other work away to keep a date open, the deposit covers that.
- It shrinks what is left to collect. A smaller final invoice is an easier one to get paid.
How much to ask for
There is no single right number. Start from your costs and your risk:
| Situation | A common approach |
|---|---|
| Small job, repeat client | No deposit, invoice on completion. |
| Small job, new client | Payment due on completion, or a modest deposit. |
| Materials you must buy up front | At least the cost of those materials. |
| A date you hold for the client (events, shoots) | A booking deposit, often 25% to 50%. |
| Large job over weeks | A deposit, then stage payments as the work is done. |
Worked example
A wedding photographer booking a $3,200 package
- Package price
- $3,200.00
- Booking deposit (30%)
- $960.00
- Balance, due before the wedding
- $2,240.00
The deposit holds a date that cannot be sold twice. Say in writing what happens to it if the client cancels.
Check the limits where you work
Some jurisdictions limit how much you can take up front, especially from homeowners. The clearest example is California: for a home improvement or swimming pool contract, the Contractors State License Board says the down payment cannot be more than $1,000 or 10% of the contract price, whichever is less.
Worked example
The same $18,000 kitchen, two places
- 25% deposit where no cap applies
- $4,500.00
- California: 10% of $18,000
- $1,800.00
- California cap ($1,000 or 10%, whichever is less)
- $1,000.00
In California the rest has to come from progress payments as the work is done, which is one more reason to bill in stages.
Provinces and other states have their own consumer and construction rules. Check with your licensing body, your province or state, or a lawyer before you set a deposit for homeowner work.
Big jobs: a deposit plus stages
On a job that runs for weeks, tie each payment to a point both of you can see: materials delivered, rough in done, final walkthrough. Each stage becomes its own invoice when it is reached.
Worked example
An Ontario renovation: $12,400 plus 13% HST = $14,012.00
- Deposit on acceptance (30%)
- $4,203.60
- Cabinets installed (40%)
- $5,604.80
- Final walkthrough (30%)
- $4,203.60
- Total
- $14,012.00
The parts are worked out from the total with tax, so they add up to it exactly.
In Sumocat, add a payment schedule to any estimate: a deposit and milestones by percent or amount, and the schedule always adds up to the total, to the cent. Each part becomes its own invoice when it is due. Schedules are free.
How to ask for it
Put the deposit in the estimate or quote, where the price is, so saying yes to the job means saying yes to the deposit. Be specific about the amount, when it is due and what it does:
- "A 30% deposit of $4,203.60 is due on acceptance to book your start date and order materials."
- "The balance is billed in two stages: $5,604.80 when the cabinets are installed and $4,203.60 at the final walkthrough."
- "If you cancel more than 14 days before the start date, the deposit is refunded less the cost of materials already ordered."
Then send the deposit invoice right away, due on receipt, and do not book the date or order materials until it is paid. With Sumocat Pro PRO, your client can accept the estimate online and the deposit invoice is created at once, due on receipt. Add a Pay button PRO and they can pay it by card or Apple Pay in the same minute.
Put the deposit on the estimate
Use a filled in estimate for your trade, then download the PDF. Free, no sign up.
Deposits and GST/HST
In Canada, the CRA’s memorandum on deposits says a deposit is generally not treated as payment for the supply until you apply it against the price, and the GST/HST becomes payable at that point. How you word and invoice a deposit can change when the tax is due, so ask your accountant how to handle yours. The memorandum dates from 1991, and the CRA notes it may not reflect later changes. More on the tax itself in GST and HST on invoices.
Questions
What is a normal deposit for a contractor?
It varies by trade and place. Many contractors ask for enough to cover materials, then bill the rest in stages. Some places cap it: in California, a home improvement down payment cannot be more than $1,000 or 10% of the contract price, whichever is less.
Is a deposit refundable?
It depends on what you agreed and on consumer rules where you work. Write down what happens to the deposit if the client cancels, and when, in the estimate or contract they accept.
What is the difference between a deposit and a retainer?
A deposit is usually a first part of the price of a defined job. A retainer often pays in advance for ongoing work or holds your availability. Say on the document which one it is and how it is applied to later invoices.
Should the deposit include tax?
If you work out the deposit as a share of the total with tax, the stages add up to exactly what the client owes. When the tax becomes payable on a deposit can depend on how it is used, so ask your accountant.
Sources
The official pages this guide relies on, with the date we last checked each one. Rules and rates change, so check the page itself before you rely on it.
- Contractors State License Board (California), Learn about home improvement contracts. www.cslb.ca.gov/Consumers/Hire_A_Contractor/Home_Improvement_Contracts/What_Is_A_Contract.aspx Checked .
- Canada Revenue Agency, GST Memorandum 300-6-8, Deposits. www.canada.ca/en/revenue-agency/services/forms-publications/publications/g300-6-8/deposits-gst-300-6-8.html Checked .