Some states cap how much a contractor can collect up front on a home improvement job, and others regulate how the deposit must be held, while many set no specific limit. The rules differ enough that the deposit you take in one state can be a violation in the next.
This guide covers five states, each checked against the state statute, with a link to the law so you can confirm it. It is general information, not legal advice; rules change, so check the current statute or a local attorney before you set your deposit.
Deposit rules at a glance
| State | Deposit limit | Other key rule | Max deposit on a $60,000 job | Law |
|---|---|---|---|---|
| California | $1,000 or 10%, whichever is less | No billing for work not done or materials not delivered | $1,000 | Bus. & Prof. Code § 7159 |
| Maryland | One-third of the contract price | No payment before the contract is signed | $20,000 | MHIC, Bus. Reg. § 8-617 |
| Massachusetts | One-third, or the cost of special-order materials if higher | No final payment until the work is complete | $20,000, or more for special orders | Mass. Consumer Affairs, M.G.L. ch. 142A |
| New York | No percentage cap | Payments before completion go into escrow within 5 business days, or are bonded | No set limit | NY Attorney General, GBL § 771 |
| Arizona | No general cap; 50% on insurer-designated storm repairs | Written contract required over $1,000 | No set limit (storm repair: $30,000) | A.R.S. § 32-1158.02 |
Checked against each state’s statute or regulator as of October 2026.
California
Deposit cap: $1,000 or 10% of the contract price, whichever is less. On a $60,000 kitchen, that is $1,000.
Under Cal. Bus. & Prof. Code § 7159, which covers home improvement contracts over $500:
- The down payment section must carry a required notice, in bold type, stating the $1,000 or 10% limit.
- Progress payments must be tied to specific work and stated in dollars and cents.
- You may not collect payment for work not yet completed or for materials not yet delivered.
- The contract must be written and signed before work starts.
In practice, California remodelers cover early material costs by scheduling a progress payment due when the materials are delivered to the job.
New York
Deposit cap: no fixed percentage, but every payment before substantial completion must go into escrow or be bonded.
New York’s home improvement law applies to most residential jobs over $500. The New York Attorney General and the statutes it is based on (GBL § 771 and Lien Law § 71-a) require that:
- Payments received before the job is substantially complete go into an escrow account at a bank in New York State within five business days.
- The customer is told where the money is held within ten business days.
- Instead of escrow, the contractor may give the customer a bond, contract of indemnity, or irrevocable letter of credit guaranteeing the money is used for the job or returned.
- The contract must include a notice explaining these rules, and a mechanic’s lien notice in bold type.
The Attorney General’s office notes civil fines of $250 to $2,500 for violating the payment-protection provisions. In New York City, residential home improvement contractors also need a license from the city’s Department of Consumer and Worker Protection.
Massachusetts
Deposit cap: one-third of the contract price, or the actual cost of special-order materials if that is higher. On a $60,000 kitchen, that is $20,000, unless special-order cabinets cost more.
Under the state’s Home Improvement Contractor law (M.G.L. chapter 142A), as explained by the Massachusetts Office of Consumer Affairs:
- Home improvement contracts over $1,000 must be in writing.
- A deposit due before work starts may not exceed one-third of the total price, or the actual cost of special-order or custom-made materials or equipment that must be ordered in advance to keep the job on schedule, whichever is greater.
- The final payment may not be demanded until the work is completed to the satisfaction of both parties.
- Your home improvement contractor registration number must appear on the first page of the contract.
The state publishes a sample contract with the deposit limit written into the payment schedule.
Maryland
Deposit cap: one-third of the contract price. On a $60,000 kitchen, that is $20,000.
According to the Maryland Home Improvement Commission and Business Regulation § 8-617:
- A contractor may not accept more than one-third of the contract price as a deposit.
- No payment of any kind may be taken until the contract is signed by both parties.
- Beyond the deposit, the law does not set the payment schedule; it is negotiated between contractor and homeowner.
- Home improvement contracts must be in writing and include MHIC license numbers and other required notices.
Legislators have repeatedly proposed raising the cap to one-half. The most recent attempt, HB 1499 in the 2026 session, stalled when its hearing was canceled, so the one-third limit still applies.
Arizona
Deposit cap: no general cap for remodeling work; 50% on insurer-designated storm repairs.
Arizona requires written contracts with specific terms for residential work over $1,000 (A.R.S. § 32-1158), but we found no statewide percentage cap on deposits for ordinary remodeling. There is one narrow exception:
- Catastrophic-storm repairs. Under A.R.S. § 32-1158.02, contracts to repair or replace damage from a catastrophic storm in an area designated by an insurer may not require a down payment of more than 50% of the total contract. These contracts must also let the homeowner cancel within 72 hours of an insurance claim denial. Breaking these rules is grounds for license suspension or revocation.
- Pools and spas have their own required payment schedule under A.R.S. § 32-1158.01.
Some websites state that Arizona limits deposits to 10% or $1,000. That is California’s rule; we did not find it in Arizona’s statutes. Even without a cap, the Registrar of Contractors can act on complaints about deposits taken for work that never starts, so keep deposits tied to real early costs.
How to cover materials when deposits are capped
A small deposit doesn’t have to mean financing the job yourself. Move the cash into the payment schedule instead:
- Make material delivery a milestone. In California, you can bill for materials once they are delivered to the job, so a payment due on delivery of cabinets covers most of the cost.
- Use special-order rules where they exist. Massachusetts allows a deposit up to the actual cost of special-order or custom materials when that is more than one-third.
- Front-load the early milestones. Put larger payments on the first visible stages, such as demo done or rough-in passed, so cash arrives before the big material buys.
- Use supplier terms. Trade accounts with net-30 terms let you pay for materials after the matching milestone payment arrives.
- Let homeowners buy some items directly. Appliances and some fixtures can be bought by the homeowner and delivered to the job.
Our progress billing guide shows how to set a draw schedule, tie each payment to a milestone the homeowner can see, and write it into the contract, so the schedule fits your state’s deposit rule.
