How much contingency should a renovation budget have?

A renovation contingency is a sum you set aside, on top of the contract price, for costs nobody can price before the work starts. There is no official percentage. A practical planning rule is around 10% for cosmetic work in a newer house with a firm design, 15% for typical kitchens, bathrooms and basements, and 20% or more for older houses, structural work, additions or projects where plans are not final. The point of the contingency is to absorb genuine surprises, such as rot, outdated wiring or an inspector's requirement, without stopping the job or borrowing in a hurry; it is not a fund for upgrades.

This guide belongs to the estimating method. The contingency calculator adds the percentage, any fixed allowances and owner costs to your base estimate. See also cost overruns and change orders and the whole-home renovation budget.

Choosing a percentage

Situation	Planning contingency (rule of thumb)	Why
Paint, flooring, fixture swaps in a house under about 20 years old	~10%	Few hidden conditions; scope is visible
Kitchen or bathroom remodel, layout unchanged	~15%	Subfloor, wiring and plumbing behind walls
Basement finish	~15%	Moisture, slab levels, ductwork surprises
House built before about 1980, walls opened	20%+	Older wiring, plumbing, possible asbestos-containing materials, framing irregularities
Structural changes, additions, suites	20%+	Engineering, foundations, code compliance
Plans not final when you sign	add 5–10%	Design changes are the most common source of extras

These are planning conventions, not data. Adjust them up for a house with a history of water problems or many past amateur repairs, and down only if the walls are already open and inspected.

What a contingency should cover

Conditions found once walls, floors or ceilings are opened: rot, mould, insect damage, undersized framing.
Code requirements triggered by the work, for example additional smoke alarms, fire separation or an inspector's request.
Hazardous materials testing or abatement discovered during demolition.
Price changes on materials not yet ordered, if the contract allows pass-through.
Unit-price items in the contract (for example "subfloor replacement at $X per sheet") whose quantity is unknown.

What it should not cover

Upgrades you decide on halfway (a better tile, extra pot lights). Price those as change orders and decide consciously.
Items missing from the scope that you could have specified. Fix the scope instead.
The contractor's mistakes. Those are theirs to fix under the contract and warranty.

Allowances versus contingency

An allowance is a dollar figure in the contract for an item you have not chosen yet (for example a $6,000 cabinet hardware and lighting allowance). If you choose items that cost more, you pay the difference; if less, you should get a credit. A contingency is your own reserve and is often not in the contract at all.

	Allowance	Contingency
Where it sits	In the contract	Usually in your own budget
What it is for	Known items not yet selected	Unknown conditions
Who controls it	Contract terms	You
Risk	Set too low to make the quote look cheaper	Spent on upgrades

Check whether allowances include installation, delivery and tax. A low allowance is a common reason a cheap quote ends up expensive.

Worked examples

Kitchen, illustrative, the calculator default. Base $60,000, contingency 15%, fixed allowances $2,000 for items not yet chosen, owner costs $2,500 (permit and a temporary kitchen):

Contingency + allowances: $60,000 × 15% + $2,000 = $11,000.
Total budget before tax: $60,000 + $11,000 + $2,500 = $73,500.

Older-house bathroom, illustrative. Base $35,000, contingency 20%, no fixed allowances, owner costs $800:

Contingency: $35,000 × 20% = $7,000.
Total before tax: $35,000 + $7,000 + $800 = $42,800.
With 13% HST on the contract and contingency (not on the owner costs here): ($35,000 + $7,000) × 13% = $5,460; total $48,260.

Rules for spending the contingency

Name a decision-maker. In a couple or family, agree who can approve a spend and up to what amount.
Require written change orders for every extra: what, why, cost, tax, effect on schedule.
Ask for evidence: photos of the hidden condition before it is covered up.
Track the balance after each change order, so you know what is left before the riskiest phase.
Do not release the contingency into upgrades until the walls are closed and inspected.

Contingency and financing

If you are borrowing, ask your lender to approve the full amount including the contingency at the start. Adding money in the middle of a project, when the house is half finished, is harder and often more expensive. Unused contingency can simply go unused on a line of credit.

Contingency percentages in practice: the secondary suite worked example uses 15% for an older basement, and comparing renovation quotes explains how to spot low allowances that would otherwise eat into the contingency.

FAQ

Should I tell the contractor my contingency?

You do not have to. Some owners prefer not to, so the contingency is not treated as part of the price. Be clear instead about how changes will be priced and approved.

Is a contingency in the contract a bad sign?

Not necessarily. Some cost-plus or design-build contracts include a contingency line. Make sure the contract says how it can be used, how you approve each use and whether unused amounts are credited back.

Do I pay tax on the contingency?

Only on what is actually spent with the contractor. Budget tax on it anyway, because any extras will carry GST/HST.

Sources

Consumer Protection Ontario — estimates, changes and written agreements
Office de la protection du consommateur — contracts with renovation contractors in Quebec
Canada Mortgage and Housing Corporation — homeowner renovation guidance
Canada Revenue Agency — GST/HST on changes and extras