Allowance (construction)
In construction, an allowance is an amount included in a fixed contract price for an item that isn't selected or fully defined yet, such as tile, light fixtures or appliances. When the owner makes the choice, the price goes up or down by the difference.
Updated November 9, 2026 · 1 min read
Why it matters
Allowances let a contractor give a firm lump-sum price before every finish is chosen. They're also where many budget fights start. A bid with low allowances looks cheaper than it is, so owners comparing bids should compare the allowances line by line.
What the contract should say
- Each allowance item and its amount.
- Whether the amount covers material only, or installation too.
- The markup, if any, on overages, and that savings are credited back.
- A deadline for the owner's selections, and what a late pick does to the schedule.
- That overages and credits are settled by change order.
An example
A kitchen contract includes a 4,000-dollar tile allowance for material. The owner picks tile costing 5,200 dollars, so a change order adds the 1,200-dollar difference plus the agreed markup. Had they picked tile at 3,500 dollars, they'd get a 500-dollar credit.
In SignMaster
The remodeling, kitchen remodel and bathroom remodel templates list allowances with blanks for each amount. The remodeling contract also sets a selection deadline and asks the homeowner to initial the allowance terms, and the change order form handles the difference.