Indirect cost rates explained for first-time applicants
What indirect costs are, how a rate is applied to a base, and what the US de minimis rate means for organizations without a negotiated rate.
Indirect costs, often called overhead or facilities and administrative costs, are real costs of running an organization that cannot be tied to one project: rent, utilities, finance staff, IT. Many funders let you recover part of them.
How a rate works
An indirect cost rate is a percentage applied to a base of direct costs. If your rate is 15% and your base is $100,000, you can request $15,000 in indirect costs. The base matters as much as the rate, because some direct costs are excluded from it.
US federal awards
Under the Uniform Guidance (2 CFR 200.414), organizations with a negotiated indirect cost rate agreement use that rate. Organizations without one may generally use a de minimis rate. The 2024 revisions to the Uniform Guidance set that de minimis rate at up to 15% of modified total direct costs (MTDC). MTDC excludes items such as equipment, rental costs, participant support costs and the part of each subaward above a set threshold. Check the current text of 2 CFR 200.68 and 200.414, and the notice itself, because some programs limit indirect costs further.
Other funders
Foundations and non-US governments set their own rules. Some allow a flat percentage, some none at all, and some expect overhead to be built into direct line items. Use the funder's definitions, not someone else's.
Common mistakes
- Applying the rate to the full budget when the base excludes some items.
- Charging the same cost as both direct and indirect.
- Ignoring a program cap stated in the notice.
Try the numbers in our budget calculator, which lets you exclude items from the indirect base.