Retainage laws by state: a 2026 guide for subcontractors

"It depends on your state" is the single most expensive sentence in retainage. Every guide repeats it, then leaves you to go find the actual number yourself. This is the reference that gives you the number: the retainage cap and release rules for all 50 states and the District of Columbia, split by private and public work, as they stand in 2026.

We build SubTrade inside Quality Gypsum Services, a commercial drywall contractor, so we know retainage is not an abstraction. It is 5 to 10 percent of every progress payment sitting in someone else's account for months, and on a thin-margin trade it is often the entire profit on the job. Knowing your state's rule is how you stop leaving that money on the table. To answer a specific contract in seconds, run it through our free construction retainage calculator, which covers all 50 states plus DC and exports a one page PDF. Everything below should be checked against the current statute and your actual contract, because retainage law changes often and the contract can be stricter than the statute.

Retainage in 90 seconds

Retainage, also called retention, is a percentage the paying party withholds from each progress payment and holds until the work is substantially or fully complete. It exists to give the owner or general contractor leverage to make sure the job gets finished and the punch list gets done. Customary retainage runs 5 to 10 percent, and the clear trend since 2019 has been toward a 5 percent ceiling, now the statutory cap in a growing majority of regulated states.

If you work in Canada, retainage is not the same thing as statutory holdback, and confusing the two costs money. We break the difference down in retainage vs holdback.

Why public and private jobs have different rules

The same state can carry two different retainage numbers, and there is a reason. Public works retainage is set by procurement and prompt payment statutes designed to protect taxpayer money and bonded subcontractors, so almost every state regulates it. Private retainage was historically a matter of freedom of contract, whatever the parties agreed to, and only a bit more than thirty states now cap it at all. So when you see a state with a 5 percent public cap and no private cap, that is not an error. The public number is law. The private number is whatever your contract says.

Retainage caps and release, by region

The tables below give the statutory cap on private and public projects, and a note on release timing or special rules. "None (contract)" means the state does not cap that category and the contract controls, commonly 5 to 10 percent. Percentages that recently changed carry the year. Verify against the current statute before you rely on any figure.

Northeast

South

Midwest

West

The gaps most guides skip

Retention bonds: getting your cash instead of a promise

A retention bond, or retainage bond, lets the contractor post a surety bond in place of the withheld cash, so the owner releases the retained money and the bond stands as security instead. It is expressly authorized by statute in states including Oregon, Washington, Louisiana, Arizona, Minnesota, Colorado, Delaware and New Hampshire, and on federal work. If your retainage is large and your surety capacity allows it, this is one of the few ways to convert dead retained cash back into working capital before the job closes out.

What happens to your retainage if the GC or owner goes broke

Retainage is a frequent casualty of a general contractor or owner bankruptcy, because it is money you earned that someone else is still holding. Several states blunt this with construction trust fund statutes that require a GC to hold construction payments, including retainage, in trust for its subs and suppliers rather than treat it as its own money. New York, Michigan, Maryland and Colorado have versions of this. On public projects, an unpaid sub usually also has a claim against the retained public funds. Knowing whether your state has trust fund protection changes how exposed your retainage actually is.

Federal projects

Federal construction runs under the Federal Acquisition Regulation and the Prompt Payment Act. Retainage there is discretionary, not a fixed percentage. The contracting officer can withhold an adequate amount only when progress is unsatisfactory, up to a 10 percent ceiling, and agencies commonly drop to 5 percent or waive retainage entirely once the work is satisfactorily around half complete. It has to be released when the work is acceptable.

How to protect your retainage

The states set the ceiling, but your contract and your habits decide how much you actually collect.

Read the retainage terms before you sign, and remember the contract can be stricter than the statute. A state cap of 5 percent does not stop a contract from calling for less favorable release timing. Push for a step-down at 50 percent completion where your state allows it, and for a clear substantial completion trigger rather than a vague one.

Document substantial completion the day it happens. Retainage release almost always keys off completion, so the faster and cleaner you establish that date, with dated photos and a tidy closeout package, the sooner the clock starts. Sloppy closeout is the most common reason retainage sits longer than it has to. Tracking your job costing against each contract also tells you exactly how much retainage is receivable across all your jobs, so nothing gets forgotten at the bottom of an old project.

Then follow up on a schedule. Retainage does not chase itself, and the party holding it is in no hurry. A standing reminder tied to each contract's release trigger is worth real money over a year of jobs.

Run your specific state and contract value through the free construction retainage calculator to see the cap and a clean summary you can hand to your GC. SubTrade starts at $299/month CAD with a 14-day free trial and no credit card required, and it tracks retainage receivable across every job so you always know what is owed.

FAQ

What is the maximum retainage allowed by law?

It depends on the state and whether the job is public or private. The most common statutory cap is 5 percent, and the trend is toward 5 percent as a ceiling. Some states still allow 10 percent, often with a step-down to 5 percent once the job is half complete, and a number of states do not cap private retainage at all, leaving it to the contract.

Which state does not allow retainage?

New Mexico generally prohibits retainage on both public and private construction projects, with a narrow exception for road contracts. It is the strongest anti-retainage rule in the United States. Every other state permits retainage, though many cap the percentage.

What is a retainage step-down?

A step-down reduces the percentage withheld once the project reaches a milestone, usually 50 percent completion. For example, a state might allow 10 percent up to the halfway point and then bar any further retainage, so the effective rate falls as the job finishes. Step-downs are a meaningful cash flow benefit, so ask for one where the law allows it.

How long can retainage be held?

Release almost always ties to substantial or final completion plus a defined window, often 30 to 90 days depending on the state and whether the job is public or private. The exact trigger and timeline are set by the state statute and your contract, which is why documenting completion promptly matters so much.

What is the difference between retainage on public and private jobs?

Public retainage is set by statute in nearly every state to protect public funds and bonded subs, so there is usually a clear cap and release rule. Private retainage is often left to the contract, and only about thirty states cap it. That is why the same state can show a firm public number and no private limit.

Can I get my retainage released early?

Sometimes. Options include a retention bond that substitutes surety for withheld cash, an early release at high completion percentages where the state allows it, and simply enforcing your contract's and state's release deadlines. A clean, early substantial completion package is the most reliable way to start the release clock sooner.