What Is Retainage in Construction?
Retainage is an earned amount withheld from payment under the applicable contract and law. Keep it separate from unfinished work and from an ordinary unpaid invoice: those balances answer different questions.
Updated October 7, 2026 · PayAppPro editorial team
Three balances worth keeping separate
- Unearned work: contract value for work not yet earned.
- Retainage held: earned value withheld under the applicable terms.
- Unpaid certified amount: an approved payment that has not yet been received.
If $60,000 has been earned on a $100,000 contract and $6,000 is retained, $40,000 remains unearned. The $6,000 is already earned but held. Any delay paying the remaining certified amount is a separate issue.
A small retainage ledger
This illustration assumes a 10% withholding rate and a separately authorized partial release. It does not establish what any particular project permits.
| Event | New withholding | Authorized release | Held balance |
|---|---|---|---|
| Earn first $20,000 | $2,000 | $0 | $2,000 |
| Earn another $30,000 | $3,000 | $0 | $5,000 |
| Approved partial release; no new work | $0 | $2,000 | $3,000 |
After the release, earned value is still $50,000. Retainage held is $3,000, so earned less retainage is $47,000. If $45,000 was previously certified, the new request associated with this release is $2,000. No new work was invented to produce it.
Reconcile the balance each period
Opening retainage + new withholding − authorized releases = closing retainage. Keep the rate, the amount it applies to and any release reference beside the calculation.
With a constant rate and no releases, a cumulative percentage calculation can give the same result. If work and stored materials have different rates, or a reduction applies only to certain work, a single percentage on the whole job may not. Use the detailed retainage billing guide for those workflows.
Prepare for release before the final request
Keep the contract clause, approved reductions, prior applications and release correspondence together. Ask which completion or closeout documents the reviewer requires and who can authorize a release. A spreadsheet balance shows what is held; it does not by itself establish when that money must be released.
Retainage requirements can depend on jurisdiction, owner and project type. Start with the state-law research hub and verify the rules that apply to the project. Do not copy a percentage or deadline from another job merely because both are in construction.
Where the balance appears on the forms
On a standard G702, Line 5 represents retainage held and Line 6 subtracts it from earned value. Line 9 includes the retained balance as well as unearned work. The G703 supplies the detailed support; the project’s retainage method determines how that detail is presented.
For the $100,000 example above, $40,000 of unfinished work plus $6,000 retained makes $46,000 of balance including retainage. Naming both components avoids confusing “finished” with “fully paid.”
Form reference: AIA Contract Documents payment-application instructions. Check the edition and form required by your contract.
Frequently asked questions
Is retainage an extra charge?
No. It is a portion of earned value withheld from payment, subject to the governing terms.
Can a retainage release create payment due with no new work?
Yes. An authorized release can increase earned less retainage and therefore the current request without increasing completed work.
PayAppPro provides AIA-style outputs, not licensed AIA Contract Documents. AIA®, G702® and G703® are trademarks of the American Institute of Architects. Confirm the required form and billing rules in your contract. Numerical examples are illustrative, not customer records.