How to calculate a contractor invoice
A contractor invoice adds labor, materials with their markup, and job costs such as equipment and permits, before tax and the deposit. Take a small bathroom remodel: four days of tile and fixture work at 32 hours, a $85 hourly rate, and $2,400 of materials with a 20% markup. That is $5,600 before tax.
total = subtotal × (1 + tax rate); balance due = total − deposit
| Line | Amount |
|---|---|
| Labor, 32 hours at $85 | $2,720.00 |
| Materials at cost | $2,400.00 |
| Markup on materials at 20% | $480.00 |
| Subtotal | $5,600.00 |
| Sales tax at 8.25% | $462.00 |
| Invoice total | $6,062.00 |
| Deposit already paid | -$1,500.00 |
| Balance due | $4,562.00 |
Tax is shown on the whole subtotal here. Whether labor is taxable depends on the state and the type of work, so if yours taxes materials only, set the rate to reflect that or invoice the two separately.
Markup is not margin
A 20% markup on materials is not a 20% margin. $2,400 marked up 20% sells for $2,880, and the $480 is 16.7% of that price. If you price to a target margin, the markup calculator converts one into the other, and the profit margin calculator checks what the whole job leaves you.
What a contractor invoice should show
- The job address and a short description of the work done.
- Labor as hours and rate, split by task or trade on a bigger job.
- Materials, with the markup folded in or on its own line, and any change orders agreed in writing.
- Equipment rental, permits, disposal and other job costs.
- Subtotal, sales tax, total, the deposit already received and the balance due, with payment terms.
On a staged job billed against a fixed price, use the project invoice calculator instead: it handles percentage complete and retainage. Clients often ask for a lien waiver with the final payment.
Materials markup is not optional
Sourcing materials takes time: pricing them, ordering them, collecting them, returning what was not used, and dealing with what arrived wrong. Passed through at cost, all of that is unpaid.
Ten to twenty percent is common on trade work. Whether you itemize it or fold it into a single materials line is a matter of taste, and folding it in is usually the quieter conversation.
The costs people leave off
Dumpster rental and disposal. Permits and inspection fees. Equipment rental for a day. Parking on a city job. None is large on its own and together they can be several percent of a job's value, which on trade margins is most of the profit.
They have their own fields here so they end up on the invoice rather than in your own pocket.
Quote first, invoice after
This prices the invoice at the end. If you are still pricing the work, the cost estimator does the same job by section for any of 46 trades, with waste, contingency and a deposit, and hands the result to the quote generator.
Related calculators
- Project invoice calculatorA share of a fixed price, billed in stages
- Hourly invoice calculatorHours and a rate, into a total
- Cost estimatorPrice the job before you start
Questions people ask
How do I calculate a contractor invoice?
Add labor hours times your rate, materials plus their markup, and any equipment, permits or disposal. Apply tax to that subtotal, then subtract any deposit already paid.
What should a contractor invoice include?
The job address and work done, labor hours and rate, materials, equipment, permits and any agreed change orders, then subtotal, sales tax, total, the deposit received and the balance due, with payment terms.
Is a 20% markup the same as a 20% margin?
No. A 20% markup on $2,400 of materials adds $480, which is 16.7% of the $2,880 selling price. Markup is measured on cost; margin is measured on price.
What markup should I put on materials?
Ten to twenty percent is common on trade work. It pays for the time spent pricing, collecting and returning materials, which is real work nobody invoices separately.
Should materials markup be shown separately?
Not usually. Most contractors fold it into a single materials line, which is accurate and avoids a conversation about the percentage rather than the price.
Does tax go on materials as well as labor?
In most US states, yes on materials, with labor varying by state and by the type of work. Check your own state, because the rules differ more than people expect.
When should I take a deposit?
Whenever you are buying materials up front. A deposit that covers the materials means a job that stalls does not stall with your money in it.
How do I turn this into an invoice?
The button under the result carries labor, materials, equipment and permits into the invoice generator as separate lines with the tax rate already set.