Overhead and profit on a contractor quote: how much is normal?

Overhead and profit is a real cost, and public-works rules say how much of it is normal. The Texas Department of Transportation allows a contractor 25% on labor for markup plus 55% on base wages for insurance and taxes, and 25% on materials (TxDOT Item 9, 9.7.1.1 to 9.7.1.3). Caltrans allows 15% on materials (Caltrans 9-1.04C), and the Florida DOT a single 17.5% on labor, materials and equipment (FDOT 4-3.2.1(4)(a)). What none of them allow is the same overhead twice: once inside a loaded labor rate and again as a separate "overhead and profit 20%" line at the bottom. That double count is the most common thing our reports flag on U.S. quotes, and it is a question, not an accusation.

What overhead and profit covers

A contractor has costs that are not on any line of your job: the office, the truck, liability insurance, workers' compensation, payroll taxes, the estimator's time on quotes that go nowhere, and the profit that keeps the business open. Those costs are recovered by marking up the direct costs of each job. There are two honest ways to do it. One is to build the markup into every line: a labor rate that already carries insurance, taxes and profit, a material price that already carries the contractor's margin. The other is to price every line at cost and add a single overhead and profit line at the end. Both are fine. What is not fine is doing both at once.

What public-works rules put in writing

These are what a state agency pays a contractor for work it did not plan, where the contractor has no competitive pressure and the agency has to protect the taxpayer. They are generous by design, and they are published, so a homeowner can use them as a public reference for what "overhead and profit" ordinarily contains. A residential contractor is free to charge more; the point is that a quote above these levels should be able to say why.

The double count

Take a roofing quote with a labor line of $6,480 for a crew of three over three days, which is 72 crew hours at $90 an hour. The BLS May 2025 wage for roofers in Austin is $24.08 at the mean and $33.24 at the 90th percentile (BLS OEWS); loaded at 1.80 that is $43.34 to $59.83, so $90 an hour already carries more than the TxDOT allowance for markup, insurance and taxes. Now the same quote adds "overhead and profit 20%" on every line, including that labor line, which is another $1,296 on labor alone. The insurance, taxes and profit that a 20% line is meant to cover have already been paid once inside the $90.

The report does not call this an error, because a contractor can price however they like. It marks the line "overlaps the reference markups" and gives you the sentence: what does the 20% cover that the labor rate does not? A contractor with a real answer (a project manager, a warranty reserve, a permit runner) gives it in a minute. A contractor without one usually drops the line.

Markup on materials

The same logic applies to materials. Our shingle floor already includes a contractor markup of 15% to 25% on the wholesale price (Caltrans 15%, FDOT 17.5%, TxDOT 25%), so a shingle line that sits above the floor and then takes another 20% at the bottom is marked up twice. Ask for the material lines at the contractor's cost with the markup stated once, either in the line or at the end. How the floor is built is in what a roof replacement should cost in Austin.

What to ask

1. Is the labor rate a loaded rate, or is it wages at cost with overhead added at the end? Either is fine; which one is this?
2. If both, what does the overhead and profit line cover that the labor rate does not?
3. Are material prices at your cost, or already marked up? What is the markup?
4. Does the overhead line apply to the permit fee and the dumpster, which are pass-through costs?

Our Quote Check does this comparison for every line, prints the public rule beside each markup and writes the questions into a letter you can forward. We are paid by homeowners only and take no fee from contractors. Check a quote from $39, or run the free Quick Estimate first.

Questions

What percentage is normal for overhead and profit on a home improvement quote?

Public-works rules give a reference: TxDOT allows 25% on labor plus 55% for insurance and taxes on base wages and 25% on materials, Caltrans 15% on materials, FDOT a single 17.5% on labor, materials and equipment. A residential contractor may charge more, but should be able to say what the extra covers.

Is it wrong for a contractor to add overhead and profit as a separate line?

No. It is one of two honest ways to price a job. It becomes a problem only when the labor rate is already loaded with insurance, taxes and profit and the separate line recovers the same costs again.

Should overhead and profit apply to the permit fee?

A permit fee is a pass-through cost paid to the city. Ask whether the overhead percentage is applied to it, and to other pass-through items such as dumpster rental and tipping fees.

How do I know if the labor rate is already loaded?

Divide the labor line by the crew hours. If the result is at or above the loaded reference for the trade in your metro area, for example $43.34 to $59.83 for roofers in Austin, the rate already carries markup, insurance and taxes.

Sources

Every figure above links to the public record it comes from. The wage, import, margin and markup figures are the ones our reports use, published as USCCDB v1.0 under CC BY 4.0. Statutes and city pages are quoted as published on September 27, 2026; check the source for changes.

1. Texas Department of Transportation, Standard Specifications 2024, Item 9, Articles 9.7.1.1 to 9.7.1.3
2. Caltrans Standard Specifications 9-1.04C, force account markups (materials 15%)
3. Florida Department of Transportation, Standard Specifications FY 2026-27, 4-3.2.1(4)(a)
4. U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2025, metropolitan areas (Roofers, SOC 47-2181, Austin-Round Rock-San Marcos, TX)
5. United States Construction Cost Database (USCCDB) v1.0, doi:10.5281/zenodo.22979157, CC BY 4.0

Related guides

• What do construction trades earn per hour in Austin, TX?
• Is my roofing quote too high?
• How much should a roof replacement cost in Austin, TX?

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