Iowa retainage law: 3% public cap, 30-day release (2026)
By Sami Chicha, EditorUpdated Checked against primary sources · not yet reviewed by a licensed professionalFact-checked
Quick answer
On Iowa public improvements the public corporation may retain at most 3% of each monthly payment, and a contractor at most the lesser of 3% or the subcontract figure from a subcontractor (Iowa Code §§ 573.12–573.14). The fund is held 30 days after completion and final acceptance, then released in full, or the balance if claims are on file. Chapter 573 excludes private work; the contract and a lawyer answer the rest.
Private work
Iowa · Private workVerified 2026-09-22
Retainage cap
No statewide statute
No statewide statute caps retainage on private Iowa construction projects. Iowa Code ch. 573, the retainage chapter, is limited by its own definitions to a 'public corporation' (the state, counties, cities, public school corporations and other bodies empowered to contract for public improvements) and to a 'public improvement' paid for from public funds.
Deadline
No statewide statute
Statute
No statewide statute
Public work
Iowa · Public workVerified 2026-09-22
Retainage cap
3%
Reduced from 5% to 3% by 2025 Iowa Acts ch. 29 (S.F. 574), effective 1 July 2025. The 3% ceiling applies both to what the public corporation retains from the contractor and to what the contractor retains from a subcontractor (the lesser of 3% or the subcontract figure). § 573.13 repeats that the retained percentage 'in no case shall be more than three percent'.
Deadline
30 days
Retained fund is held for 30 days after completion and final acceptance of the improvement; if no claims are on file at the end of that period the entire unpaid fund is released to the contractor. Separately, at any time after the work is substantially completed the contractor may request early release under § 573.28, and approved retained funds must be paid at the next monthly payment or within 30 days, whichever is sooner.
The public corporation shall retain from each monthly payment not more than three percent of that amount that is determined to be due according to the estimate of the architect or engineer. b. The contractor may retain from each payment to a subcontractor not more than the lesser of three percent or the amount specified in the contract between the contractor and the subcontractor.
Iowa Code §§ 573.12–573.14, 573.28. · Official text · retrieved 2026-09-22
Who this applies to
Iowa's retainage chapter, chapter 573 of the Iowa Code, is written for public improvements paid for from public funds [1]. The bodies it binds are public corporations: the state, counties, cities, public school corporations, and any officer, board or commission empowered by law to contract for public improvements [1]. Its limit also reaches one tier down, to what a contractor keeps from a subcontractor [1].
Private jobs fall outside those definitions, so chapter 573 sets no cap or release date for them [1]. This page covers public work only; on a private job, the contract and a lawyer answer the retainage question.
What the rule says
A public corporation may keep no more than 3% [1] of each monthly payment, measured on the amount the architect's or engineer's estimate shows as due, and a contractor may keep from a subcontractor no more than 3% or the amount the subcontract specifies, whichever is lower [1]. What is kept becomes a fund that stays with the public body for 30 days [1] after the improvement is completed and finally accepted. Claims can be filed against that fund; when the period ends, the contractor receives all of it if none are on file, or the remaining balance if some are.
How to comply
Check both tiers. Compare the prime contract and each subcontract with the 3% [1] ceiling. Section 573.13 repeats that the retained percentage is in no case more than 3% [1].
Ask early. Any time after the work is substantially complete, the contractor may request early release of retained funds under § 573.28. Approved funds are paid at the next monthly payment or within 30 days [1], whichever comes sooner.
Mark the final dates. Under § 573.14(2), final payment that is not made within 40 days [1] after the work is completed and accepted and all required documentation is furnished, or within up to 50 days [1] where the contract so specifies, draws interest from the 31st day after completion [1]. The rate is the public-funds rate under § 12C.6, or prime plus 1% for institutions under chapter 262 [1].
Late early release. Under § 573.28(2)(b), retained funds not released within 30 days [1] of when payment becomes due accrue interest at prime plus 1% [1] a year until paid.
Progress payments. Late progress payments carry interest under § 573.12(2)(a) [1].
Before relying on these dates, set them beside the chapter itself, linked in the Sources below, and beside the payment terms of your own contract.
What changed recently
The ceiling was 5% until 2025 Iowa Acts chapter 29 (S.F. 574) lowered it to 3%, effective July 1, 2025 [1]. The 3% figure now governs both what the public corporation retains and what a contractor retains from a subcontractor [1].
Related
Retainage calculator: set the rate to Iowa's public ceiling and see what each pay application holds back.
: 1 more jurisdiction verified and published, 47 of 51 in all.
: California private work corrected: Civ. Code § 8811 (SB 61) caps retention at 5% for contracts entered into on or after January 1, 2026; the row had said no cap.
: Missouri private work corrected: Mo. Rev. Stat. §§ 436.300 to 436.336 cap private retainage at 10% and require release within 30 days of substantial completion; the row had said no private retainage rule.
: Tennessee corrected: Tenn. Code Ann. § 66-34-203 caps owner-to-prime retainage at 5% of the contract, on public and private work; escrow applies to prime contracts of $500,000 or more, and the $300-a-day damages do not apply to public owners.
: Idaho private work added: Idaho Code § 29-115 caps private retention at 5% and requires release within 35 days of final completion; the row had left private work out.
: Rhode Island corrected: the 5% cap in R.I. Gen. Laws § 37-12-10.1 also covers private lienable work of $250,000 or more, and a retainage application may be submitted only 60 days after substantial completion unless the contract allows earlier.
: Oklahoma public work corrected: since November 1, 2022, 61 O.S. §§ 113.1 and 226 reduce retainage to 2.5% of the amount earned to date after 50% completion with satisfactory progress, with no bond condition.
: Montana public work corrected: state and local public contracts are capped at 5% under Mont. Code Ann. § 18-2-316, and final payment on building contracts is due within 30 days of final acceptance (§ 18-2-306).
: Delaware public work corrected: 29 Del. C. § 6516(f)(3) requires retainage to be paid within 60 days after completion or notice of completion, with interest available from the 61st day; the row had no release deadline.
: District of Columbia corrected: D.C. Code § 2-203.01 requires a 10% retent on District construction contracts until completion and acceptance, and the Private Contractor and Subcontractor Prompt Payment Act counts retainage as an undisputed amount due on its schedule; both rows had said no statute.
: Colorado private work updated: HB26-1311 lets a contractor or subcontractor tender a retainage bond of up to 5% in lieu of retainage on contracts from August 12, 2026, and the owner must accept a compliant bond.
: Kentucky private work updated: 2025 Ky. Acts ch. 156 raised the KRS 371.160 escrow threshold to $2,000,000 and barred waiving it by contract.
: 10 more jurisdictions verified and published, 46 of 51 in all.
: Page published.
: Dataset first published with 36 of 51 jurisdictions verified.
