How to price a job estimate so it pays in the US

GuideUSChecked 29 October 202616 primary sources8 min readUK version

The short answer

In the US, price from your own costs: burdened labor cost divided by efficiency (billable over paid hours), plus overhead per billable hour, divided by one minus your target margin. Then write the estimate: scope, price, how sales tax applies in your state, a deposit within your state's limits, validity, and any cancellation notice the sale requires.

How do I work out an hourly rate that pays?

Build it from the hours you sell, not the hours you pay. Cost per billable hour is your burdened hourly wage divided by efficiency, plus overhead divided by billable hours.

Burdened cost is the wage plus payroll taxes, workers' comp and benefits. Efficiency is billable hours over paid hours: drive time, supply house runs, callbacks and training are paid but not sold.

Six-tech shop, worked through (indicative, As of Oct 2026)Figure
Burdened labor: $32.00 an hour plus 30% burden$41.60 an hour
Billable hours: 6 x 2,080 paid hours x 60% efficiency7,488
Labor per billable hour: $41.60 / 0.60$69.33
Overhead per billable hour: $780,000 / 7,488$104.17
Break-even per billable hour$173.50
Rate for a 20% net margin: $173.50 / 0.80$216.88

Cross-check: 7,488 hours at the unrounded rate bring in $1,623,960 against $519,168 of labor and $780,000 of overhead (trucks, fuel, insurance, office staff, rent, marketing and the owner's salary), a profit of $324,792, or 20.0%. Every input is an assumption: your own job costing replaces it.

What markup should I put on materials?

There is no number to copy: choose the margin you need, then convert it, because markup is profit over cost and margin is profit over price. A 25% markup is only a 20% margin.

In the example, $216.88 less the $173.50 cost leaves $43.38: 20% of the price, 25% of the cost. A flat-rate price is task hours times your rate plus materials times a markup factor. A water heater swap at 3.5 hours is 3.5 x $216.88 = $759.08, plus $850 of materials x 1.5 = $1,275.00, so $2,034.08 (indicative, As of Oct 2026). That 1.5 factor is a 50% markup, a 33.3% margin on the materials. Recheck your price book when costs move.

Do I charge sales tax on the estimate?

It depends on the state and on whether the job repairs or improves real property, so state the sales tax treatment on every estimate. Examples, As of Oct 2026:

  • Texas: labor to repair or remodel residential real property is not taxable; repair, remodeling and maintenance of nonresidential real property is (34 Tex. Admin. Code sec. 3.357). The state rate is 6.25% plus up to 2% local, 8.25% at most.
  • California: a contractor is the consumer of materials it installs in real property and pays the tax when buying them, but the retailer of fixtures, such as a water heater (Cal. Code Regs. tit. 18, sec. 1521). Installation labor is not taxable (sec. 1546).
  • Florida: on a lump-sum real property job, the contractor pays tax on the materials as their final consumer (Fla. Admin. Code r. 12A-1.051).
  • New York: repairing or maintaining real property is a taxable service; a capital improvement is not, and you keep the customer's Form ST-124 to prove it (Tax Law sec. 1105(c)(5)).

What must a written estimate include?

Scope, price and terms in writing, plus whatever your state adds for home improvement work.

  • Every estimate: owner and site, scope with exclusions and allowances, price with its sales tax treatment, schedule, a validity period, payment terms, and your license number where the state requires it on contracts, bids and ads, as California and Florida do (Bus. and Prof. Code sec. 7030.5; Fla. Stat. sec. 489.119(5)(b)).
  • California: home improvement contracts carry the license number, statutory notices and a payment schedule linked to progress (Bus. and Prof. Code sec. 7159); service and repair contracts of $750 or less follow sec. 7159.10.
  • New York: home improvement contracts over $500 must be in writing with the 3-day cancellation notice (Gen. Bus. Law secs. 770 and 771).
  • Florida: home contracts where labor and materials exceed $2,500 include the Homeowners' Construction Recovery Fund notice (Fla. Stat. sec. 489.1425). As of Oct 2026.

How much deposit can I take on a home job?

Some states cap it or attach conditions; check yours first. Examples, As of Oct 2026:

  • California: no more than $1,000 or 10% of the price, whichever is less (Bus. and Prof. Code sec. 7159.5).
  • New York: payments before substantial completion go into an escrow account within 5 business days, or are covered by a bond (Lien Law sec. 71-a(4)).
  • Florida: taking more than 10% up front on covered residential work means applying for permits within 30 days and starting within 90 days after they issue, unless there is just cause or a written agreement (Fla. Stat. sec. 489.126(2)). It is not a cap.

A "nonrefundable" deposit is tested as liquidated damages: in a California consumer contract they are void unless actual damages would be impracticable or extremely difficult to fix (Civ. Code sec. 1671). Tie deposits to equipment you order.

When can a customer cancel an estimate signed at home?

Under the FTC Cooling-Off Rule, a buyer generally has 3 business days to cancel a sale of $25 or more made at their home, or $130 or more at a temporary location, and you must give written notice and a cancellation form (16 CFR Part 429). As of Oct 2026.

  • It applies even when the buyer invited you. The repair exclusion covers only the buyer's personal property, such as an appliance, and never extras sold on the visit (429.0(a)(5)).
  • A bona fide emergency is excluded only with the buyer's separate dated, signed, handwritten waiver (16 CFR 429.0).
  • States add rules: California gives 3 business days, or 5 for buyers 65 or older (Civ. Code sec. 1689.6); Texas 3 business days on home solicitation sales over $25 (Bus. and Com. Code ch. 601); Florida 3 business days (Fla. Stat. secs. 501.021 to 501.055). As of Oct 2026.

The Academy covers deposits and cancellation on a home job, checking a flat-rate book and pricing labor beyond the wage.

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Questions owners ask

How do I price an estimate so the job is profitable?

Divide your burdened hourly labor cost by efficiency, add overhead divided by billable hours, then divide by one minus your target margin. In an indicative example, $69.33 of labor and $104.17 of overhead give $173.50 to break even and $216.88 for a 20% margin. As of Oct 2026.

What markup should a small contractor put on materials?

There is no figure to copy: set the margin you need and convert it. A 1.5 materials factor is a 50% markup and a 33.3% margin; a 25% markup is a 20% margin.

Do I charge sales tax on labor?

It depends on the state. Texas taxes repair and remodeling labor on nonresidential property but not on residential; New York taxes repairs but not capital improvements; California does not tax installation labor, though fixtures are taxed. As of Oct 2026.

How much deposit can I take in California?

For a home improvement contract, no more than $1,000 or 10% of the price, whichever is less (Bus. and Prof. Code sec. 7159.5). As of Oct 2026.

Can a customer cancel an estimate they signed at home?

Usually, within 3 business days under the FTC Cooling-Off Rule for sales of $25 or more at the buyer's home, even if they invited you (16 CFR Part 429). Some states add longer periods, such as 5 business days for California buyers 65 or older. As of Oct 2026.

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